Qualifying

How much house can I buy?

Qualifying for a home at a particular price point is largely a matter of mathematics and credit history. Here’s an easy rule of thumb:

 

Monthly gross income x 28% = PITI (principal, interest, taxes & insurance).

Monthly debt (car payment, credit card debt, student loan, etc) plus PITI cannot exceed 36% of monthly gross income.

 

Lenders use credit scores to evaluate mortgage applicants. These scores—generated by certified credit bureaus—tell a lender how likely you are to repay a loan and to make your payments on time. The higher the score, the lower your risk to the lending institution, i.e. the more likely you are to qualify for the loan.

 

Credit scores are based on:

  • Payment history
  • Amounts owed
  • Length of credit history
  • New credit
  • Types of credit in use