Home Mortgage Affordability Calculator - Income You Need

Your income is a key element in determining how much home you can afford, who will give you a loan, and how much it will cost to purchase that home. But how much money do you need to make to buy the dream house you want? Perhaps you want to build a home. This is key information, because it tells you where you stand in finding the right mortgage. The good news is that with a bit of information and a home affordability calculator, you can find the answers to the questions you need.

What Lenders Look For

For those looking to purchase a home, many factors go into getting the mortgage for that loan. In fact, lenders look at a range of things to determine what level of risk you are. The higher the risk, the less likely you are to get a low interest rate, or even a loan at all. On the flip side, lenders want to lend you money, so they put a variety of qualifications in place to help you qualify for the loan. Here are some of the things they will look at.

• Your Income: The money you bring in must be enough to make a monthly payment on the loan and meet your other financial obligations. If you do not earn enough, you are more likely to default on your loan and cost the lender money.
• Your Credit Score: Your credit score is also important. It shows lenders how responsible you are about making your monthly payments. The better your credit score, the more affordable the loan will be in the long run thanks to a lower interest rate. All lenders have credit score qualifications in place.
• Your Employment History: Another qualifying factor is long-term employment. It shows you are likely to continue in good, steady work and therefore have the money to make your payments each month.

These are just some of the things your lender will use to judge how much of a risk you are. They also look at your debt-to-income ratio, which compares how much debt you have to the income you earn, plus your references and your repayment history on other loans, including home loans you have had. All of this information comes down to one decision by the lender: are you a good investment?

Why Your Income Matters

When all is said and done, your lender is still looking at what you make. Why does this matter? Unless you earn enough to cover the monthly payments on your current loans plus what you are looking to borrow, they are not going to lend you more money. So do you make enough?

To answer that question, you need to consider a few things. A good way to learn how much you will need is to use a mortgage affordability calculator that figures out exactly what you'll need to earn to qualify for the home purchase you want. The best way to show how much you will need to earn is with an example.

What does this information mean for you? First, it shows how much money you need to earn to qualify for a loan through the lender. If you have other factors, consider them. Perhaps you qualify for a lower interest rate, or you are willing to pay off your mortgage loan over 40 years instead of 30. These choices change the income you need to qualify. You will also want to find out the real estate taxes for the area you are considering before getting started. Usually, you can do this through the Auditor of that county or state.

Are Debt Obligations Holding You Back?

For many future homeowners, the biggest factor in whether they can afford a home is their debt obligations beyond the mortgage payment. If you owe money on credit cards, personal loans, car loans, or other real estate loans, you will need to earn considerably more per year to qualify for the loan you need and want. If you can lower what you owe here, you can save considerably on your loan, because you will be able to put more toward it. In terms of how much you need to make, with fewer obligations toward other loans you would qualify for a loan with much less income per year.

Use the same figures as above, but with only $500 in debt obligations, and you now have a different scenario: you only need to make $70,800 per year to qualify for this loan. You can determine your own qualifications by simply using a mortgage calculator to help you.

Remember, too, that you can use a mortgage calculator like this to determine how much home you qualify for on what you currently make. Change the loan terms and borrowed amounts to match your current situation, and you are likely to see exactly what amount of home works for you.