Denver Homes Online

How Much House Can I Afford?

Find Out - Before You Start Searching For A Home

Your credit rating, your income, and your debts, are the 3 most significant factors in helping to determine how much house you can afford, as well as the type of financing you'll qualify for. 

Qualifying For The Most House

Buyers who qualify for more financing, can buy more of a home.  Other ways to help you afford more of a house can also come from any of the following:

• Savings or gifts from family members.
• Low interest rates.
• Special financing programs for first-time buyers.

Getting The Right Loan

Once the mortgage lender has an understanding of your personal finances, he or she will determine which loan program is best suited for you.  To get there, your lender will calculate two important financial "ratios" to know how much you can afford, and borrow:

1. Housing expense ratio (front ratio)
2. Debt-to-income ratio (back ratio)

What Are These Ratios?

A housing expense ratio is compares your anticipated mortgage payment with your gross monthly income.  Your debt-to-income ratio is your total monthly debt compared to your gross monthly income. 

How Ratios Are Applied

Here are how the ratios are applied for the 3 most popular types of loans:

• FHA & VA Loans: FHA allows 31/43 (front ratio/back ratio), and VA only uses the back ratio of 41%.
• Conventional Loans: Allow a maximum of 28% for the front ratio and 36% for the back ratio (28/36).
• Non-Conforming Loans: These loans only use the back ratio and have gone as high as 55%, but come with higher interest rates because they are much riskier loans.  

Calculate Your Purchasing Power

If you'd like to attempt your own calculations of your purchasing power, try our helpful financial calculators.  Note: you'll need to know the debt and income guidelines for these calculations:

Your Debts

This is your minimum payments on all accounts except those paid-off within the next 9 months.  Utilities are not included in most calculations.  Debts include your credit cards, car payments, recurring loans, child support, etc.

Overtime & Bonuses

Cannot be used in income unless you have been receiving it consistently for two years and employer will verify it will continue.

Self Employed and Commission Incomes

Requires a two year history, and is calculated after all deductions.

Child support Income & Alimony

Must continue to receive for an additional three years.

Mortgage Payments Include

Principal, Interest, Taxes, Insurance, and HOA Dues, if mandatory.

Increasing Your Purchasing Power

Other factors that will help you increase your purchasing power are:

• Down payment or closing cost assistance from government agencies.

• Gifts from family members

• Incentives from home sellers 

All the above factors will vary in their impact on your ability to qualify for a loan.  Qualifications are also highly dependent upon your credit history and score.   

Free Personal Consultation

As you can see, there's no substitute for professional help to determine "How Much House Can I Afford" to buy.  With our assistance, you'll discover all the options and know how much your maximum purchasing power is.  We're happy to offer you a 'no obligation' consultation, so we can get to know you, and your very special needs. 

Call Today

Simply fill out the easy form below, to arrange a mutually convenient time to visit.  We'll respond quickly.  We know you'll appreciate a professional evaluation of all your options.