Trending Topics

Most Popular Searches

3 Questions to Ask Yourself Before Applying for a Home Loan

May 18, 2015 | By

Buying a house is the largest financial expense many of us will ever make. It’s a decision to approach with honesty and sincerity, so you don’t get in over your head. There’s “purchase power” versus “purchase comfort zone,” says Eric Broermann, a real estate agent with McWilliams Ballard, Inc. in Alexandria, VA. “You should be comfortable with the loan amount and not feel it’s a burden that prevents you from paying for other things.”

According to a recent article in DailyWorth, buying a home that’s too expensive can leave you strapped and unable to prepare for other financial goals, like paying off your student debt or taking vacations. “Determining how much you can spend is the first step to responsible home buying,” says the article, which offers these three to help you determine your own purchase comfort zone.

  1. How much have you saved for a down payment? Most mortgage lenders will require a down payment ranging from 3 to 20 percent of the home’s purchase price. If you’re a first-time homebuyer, taking time to aggressively save a down payment will pay off — a larger down payment will let you buy more house or make smaller monthly payments, advises DailyWorth.
  2. How much will your mortgage cost each month? Lenders will calculate your debt-to-income ratio to determine how much home you can afford. If you are already using 40 percent or more of your gross income to pay car payments and credit cards, that leaves less than 60 percent for other your household spending (like your phone bill, utilities, and transportation) and house payment. Most lenders recommend that you spend no more than 28 percent of your monthly income on a mortgage payment, says the DailyWorth article.
  3. Is your credit score in good shape? In addition to having a good credit history, your credit score will determine whether you qualify for a mortgage and what terms you’ll be offered. Having a FICO score of 700 versus 698, a difference of two points, could cost you thousands in interest charges each year, say the experts. So, if you’re on the border, you may want to boost your score a bit. “Sometimes the fix can be quite simple,” says Kris Crecelius of All Real Estate Options in Orange Park, FL. For example, if a high balance on one credit card is keeping your credit score low, you should pay down that card and wait a month (for a rescore) to apply for a home loan, she suggests.

Once you’ve determined how much you can spend on a new home while still meeting other financial goals and obligations and avoiding the stress of excessive debt, you’re ready to start shopping, notes the article. “Just remember to stay within your budget: Avoid the temptation to look at houses that cost more than you’ve committed to spend and you’ll be more satisfied with your home — and your whole financial life — in the long run,” DailyWorth advises.

Source: How Much Should I Spend on a House? by Nancy Mann Jackson, published by DailyWorth, April 02, 2015.




We appreciate and encourage lively discussions on our websites’ content. While we value openness and diverse points of view, all comments should be appropriate for people of all ages and backgrounds. We do not tolerate and will remove any comment that does not meet standards of decency and respect, including, but not limited to, posts that:

  • are indecent, hateful, obscene, defamatory, vulgar, threatening, libelous, profane, harassing, abusive, or otherwise inappropriate
  • contain terms that are offensive to any group based on gender, race, ethnicity, nationality, religion, or sexual orientation
  • promote or endorse a product, service, or vendor
  • are excessively repetitive, constitute “SPAM” or solicitation, or otherwise prevent a constructive dialogue for others
  • are factually erroneous or misleading
  • threaten the privacy rights of another person
  • infringe on intellectual property and proprietary rights of another, or the publication of which would violate the same
  • violate any laws or regulations

We reserve complete discretion to block or remove comments, or disable access privilege to users who do not comply with this policy. The fact that a comment is left on our website does not indicate Fannie Mae’s endorsement or support for the content of the comment.

Fannie Mae does not commit to reviewing all information and materials submitted by users of the website for consideration or publication by Fannie Mae (“User Generated Contents”). Personal information contained in User Generated Contents is subject to Fannie Mae’s Privacy Statement available here. Fannie Mae shall have otherwise no liability or obligation with respect to User Generated Contents and may freely copy, adapt, distribute, publish, or otherwise use User Generated Contents without any duty to account.

A Window Into Housing In America

Subscribe to our newsletter for each week's top stories. Enter your email address below to stay in the know.