A pre-approved mortgage lets you know the maximum amount you can borrow to buy a home before you even begin looking for one. You can then make an offer on a property with peace of mind.
To figure out how to do it, most mortgage lenders use this formula:
(Note: We are using $60,000 gross income in our example.)
(Note: We are using $60,000 gross income in our example.)
-Take your Gross Income and multiply it by .35 ($60,000 x .35 = $21,000)
-Minus the taxes and heating ($21,000 – $3000 – $1200) = Maximum annual payments ($16,800)
-Divide by 12 months ($16,800/12) = Maximum monthly payment ($1400)
With this knowledge, ask your real estate agent what price market you should be looking in for a home.
