How Much Can I Borrow For My Mortgage?

It may seem that in this easier credit time that you can borrow as much as you like.

There are several basic rules of thumb when considering your total loan size:

• 2-3 times your annual household income
• No more than 35%-40% of your monthly income goes to pay for the combined monthly debt payments of a mortgage, car, credit cards, etc.

Some lenders allow you to go as high as 55% combined debt load of your monthly pretax household income. Keep in mind that this is before taxes, so a big part of the remainder after your mortgage payment is taken by Uncle Sam.

One way to lower the cost of your monthly payment is to switch to using an interest-only loan or a minimum payment option loan. These loans can have substantially lower monthly payments, at least in first years. This allows you to purchase a more expensive property that you may not be able to afford if you had to make a full payment.

These types of loans have been very popular in expensive areas of the country.

Many lenders have loan programs that allow you to “state” your income rather than proving it. As such, you can qualify for a loan based on your “stated” income.

It is easy to borrow too much. Many mortgage lenders used to require at least 5%, 10%, or more as a down payment. Now, 100% financing is much more common. This allows people to have more aggressive loan choices.