House prices continue to rise, and most people cannot afford a home without a mortgage. A huge percentage of the younger population and first home buyers need a mortgage to buy a home. So, how much can you afford to pay for a house? Keep reading to find out what determines the price of the most affordable house for you.
1. Credit score
One’s credit score determines how much one will pay for a house, how much mortgage they will be eligible for, or whether they will succeed at all. A higher credit score will increase the chances of one affording to buy a home. After a consultation with the credit checkers, you realize that the higher your credit score is, the higher your borrowing rate is because interest rates will be relatively low.
2. Debt to income ratio
The other determinants are one’s income and debt. The ratio between debt and income determines whether banks will consider your credit or not because no lenders want to be involved with a financially challenged borrower who may default payments later. You can afford a house more if you have a higher income and lesser.
3. Down payment
Lastly, one would afford a house better if they have a larger amount for the down payment. The big down payment may relieve one from paying mortgage insurance, and thus they will remain with more money to pay off the interest. With a better mortgage rate, either variable or fixed mortgage rate, one could end up paying less.
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