How Much Can I Afford?
When shopping for a mortgage, you should first figure out how much you can afford. Lenders will not simply give you a blank check. Instead, they'll ask for information about your income, monthly payments on debt, the purpose of the loan and any savings you may have. This helps to determine how much of a loan you can safely repay.
The goal of lenders is to lend you an amount that you can repay with a certain level of certainty, to minimize the risk of having you default on the loan. Of course, until you know how much you will be able to receive from lenders, it is difficult to begin shopping for your new home. It works both ways, though, as the amount of the loan will also depend upon the value of the home.
A lender will be willing to give you more money if you are buying a $500,000 home than if you are buying a $100,000 home, because they can reclaim more value if you default. That, too, helps to mitigate the risk that they are taking on.
Another important factor is the interest rate , which gives you some flexibility. We'll work closely with you to find the right sized loan and the best interest rate. However, keep in mind that the greater the interest rate you're willing to take on, the more money you may be lent. That is because the profits are higher for the lenders, so they are willing to take on more risk on the loan.