Fool how much can i borrow mortgage

These also send information to linked Social Media channels. Skip to main content England Scotland. Housing advice Housing advice. How much can I borrow? How much should I borrow? Buying on your own If you are buying on your own, a lender will usually allow you to borrow approximately three times your annual income. Buying with someone else If you are applying for a joint mortgage, you will probably be able to borrow approximately three times the higher income plus one times the lower income.

Buying if you're self-employed If you're self-employed or have an irregular income, you will usually need to provide the lender with accounts for the last three years. Things to consider before you take up an offer Interest rates - allow for the fact that interest rates may increase in the future when deciding if you'll be able to afford the payments. How much deposit will I need? How much will my repayments be?

Your monthly mortgage payments will depend on: the kind of mortgage you have taken out interest rates the length of time you have to pay your mortgage off the mortgage term. Getting a 'Key Facts' document If you're given information about a mortgage that is tailored to your circumstances, from a lender or mortgage broker, you should be given a 'Key Facts' document summarising the most important features of the mortgage, including the costs. What if I can't afford to buy my own home? Email Print this article.

Housing laws differ between Scotland and England. This content applies to Scotland only. Owning a home can be very expensive because surprise repairs are common. The consequences of being unable to pay your mortgage because of a setback are also dire, as you could lose the house and damage your credit.

Having an emergency fund allows you to be prepared for surprises without debt, and reduces the chance a health issue or job loss could lead to foreclosure.

Because the risks are high of wiping out your savings to buy a home, seriously consider waiting until you have enough money saved for emergencies -- separate from your down payment -- before you make an offer on a home. It's easy to get caught up in whether the down payment and ongoing costs are affordable -- but you also need to look at the opportunity cost.

Create a sample budget, factoring in housing costs and other expenditures, to see how much money you'd have left over after paying for houses valued at different prices. Only you know what your financial goals are -- which is why it's important to decide for yourself how much house you can afford instead of just borrowing what a lender tells you that you can. When lenders decide if you can qualify for a home loan -- and determine what amount to lend you -- they look primarily at debt-to-income ratios.

That's because they care only about the likelihood you'll be able to repay the loan. Your debt-to-income ratio DTI is the percentage of your gross monthly income that will go toward paying debts, as well as paying your mortgage in other housing costs. Lenders don't consider all costs, because they don't factor in things like utilities and maintenance -- but DTI does provide insight into how much of your income will be eaten up by required expenditures.

You can calculate your debt-to-income ratio by adding up all the monthly payments you make on all debts and housing costs -- including your mortgage, car loans, student loans, credit card debt payments, taxes and insurance, and other required monthly obligations.

This means, if you have too much debt, you won't be able to afford a very expensive house -- or any house at all -- since your total payments including housing costs would make your debt-to-income ratio too high. Likewise, if you live in a place where housing is very expensive, monthly mortgage and property tax payments alone might be enough to push your debt too high to meet debt-to-income ratio requirements.

The debt-to-income ratio that takes housing costs and monthly debt costs into account is called the "back-end" ratio. The front-end ratio is simply the amount you spend on housing, including mortgage, taxes, and insurance. Your other debts don't matter with this calculation -- only your total housing costs compared to your income. If total housing expenditures exceed this level of gross income, lenders may not give you a mortgage or may charge higher rates.

While you need to decide on your own what you think you can afford, your opinion won't matter much if no lender will give you a mortgage or you can't borrow enough to buy even the cheapest house in your area. To find out exactly how much a mortgage lender is willing to loan you, get pre-approved before you start shopping for a home. This involves submitting your financial information to mortgage lenders, having your credit checked, and providing proof of income.

If your lender approves you for a bigger loan than you've decided you can afford, ask the lender to write you a pre-approval letter with the smaller amount you're comfortable borrowing. You'll take this letter to your realtor and present it to sellers. There's nothing more frustrating than wanting to buy a home and either getting denied for a mortgage or deciding you can't really afford it.

This can be an especially big problem for people who live in areas where housing is very expensive. If you can't afford a home, don't get discouraged. Saving for a larger down payment can help you qualify for a better interest rate and make mortgage payments lower so you're better able to afford monthly costs.

FHA mortgage rates. VA mortgage rates. Jumbo mortgage rates. FHA refinance rates. VA refinance rates. Jumbo refinance rates. The term of your loan will also dictate what your monthly mortgage payment looks like.

A shorter-term loan -- for example, 15 years -- will leave you with a lower interest rate on the amount you borrow. But it will also result in a higher monthly payment, since you're paying off your home in half the time it would take with a year mortgage. Whether you're a first-time home buyer or are moving from one home to another, it's important to know how much house you can afford.

Crunch those numbers carefully before you make an offer on a house so you don't wind up overspending on a home and regretting it after the fact. Getting pre-approved for a mortgage loan is an important step in the home buying process. Our experts recommend mortgage pre-approval before you begin looking at houses or deciding on a real estate agent.

That's a good limit to start with, but if your other bills are high or you have a lot of existing debt, you may want to keep your housing costs to a lower percentage of your income.

If you live frugally and don't intend to spend a lot outside of your housing costs, you may have more leeway to buy a more expensive home. Being able to afford a home hinges on your income and existing debt and bills. Figure out how much you earn each month and then use a mortgage calculator to see what home loan you can swing. Maurie Backman has been writing about personal finance for years. A firm believer in educating readers without boring them, she aims to produce content that's interesting, engaging, and easy to understand.

Sometimes, she'll even make the occasional joke. Maurie started out as a writer for Fool. In her spare time, she enjoys hiking, reading, and reveling in the fact that her creative writing degree actually amounted to something. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team. The Motley Fool has a Disclosure Policy. The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.

The only thing carrying a credit card balance builds is your interest payment—and the total cost of what you financed. To build credit, it's much better to pay off what you charge each month and never carry a balance. In fact, to improve your credit score it's best to use less than 30 percent of your credit line to keep your "debt utilization" rate low. Debt utilization is the amount you borrow relative to the amount you're able to borrow. A high utilization rate—or even an increase in the amount of credit you're using—can flag you as a higher risk, lower your credit score and raise your interest rate.

Myth 4 Closing out credit cards will improve your score. Wrong again—for a couple of reasons. Second, closing cards can reduce the average age of your accounts, making you seem like a newer borrower, which can lower your score. However, closing a credit card can help you manage spending and protect you from identity theft if you're not using the account. If you decide to close a card, you may want to adjust your spending or pay down existing balances at the same time to keep your debt utilization ratio steady.

Myth 5 Getting married merges your credit history. Even when you say "I do," your credit histories always remain separate, unless there's a joint account or authorized user.

In that case, there's a shared history, and you're jointly liable for any charges. If you're divorced or separated, a joint account still means joint liability, and any new or unpaid debts can affect your credit score. I suggest every couple openly discuss their attitudes toward credit and debt early in their relationship. Myth 6 You can pay a company to quickly remove bad credit marks from your history. Accurate negative credit information can stay on your credit report for up to seven years.