So you’ve decided to invest in a home in the Highlands, NC area. Now what?
While some interested Western NC home buyers like to start by browsing available homes on the market, I recommend that you first determine how much money you’re going to be able to borrow.
This early footwork will end up saving you both time and money because you’ll just be focusing on homes that fit your price range.
So what exactly do bankers consider when determining how much money they’re willing to loan you?
Continue reading to find out!
Investing in Highlands, NC Area Real Estate
Here are some of the main factors that bankers consider when offering you a loan:
- Monthly Income. One of the first things that a bank will ask about is your monthly income. They’ll likely request to see paycheck stubs from the last couple of months to verify your average wages. They’ll also want to know about any additional sources of income you may have. Recently change jobs? The banks may weigh your last income tax return more heavily than your recent wages.
Bottom line is, the higher your income, the more likely you’ll be qualified for the loan you need to purchase a Highlands area home.
- Monthly housing expenses. Next, the banker will likely ask about all of your regular housing expenses, which will then be subtracted from your monthly income. Bankers know that there are more expenses to home ownership than just the initial purchase of the property. These may include home insurance, real estate taxes, and even home owner association fees.
There’s also specialized housing costs, such as mortgage insurance. Banks may require that home buyers purchase this if they’re borrowing more than 80 percent of the value of the home. This protects banks from the possibility of you defaulting on your home.
- Additional monthly expenses. Usually, a banker will also ask you about your other financial obligations, such as credit card debt, charge accounts, car loans, student loans, etc.
The bank will likely ask you about the total balance due and the minimum monthly payment for each of these items.
By subtracting these expenses from your income (as well as your estimated housing expenses), the bank will know your disposable income.
This figure is important because that’s the money you’ll have available for your house payment and everyday living expenses (such as food and fuel).
- Ratio of debt to income. Next, the bank will calculate the ratio between your total monthly payments on debt to your monthly income. Ideally, no more than 36 percent of your gross income is going toward your total debt. Although some lenders are more flexible, 36 percent is generally the industry standard.
Thus, if your total gross income is $8,000 a month, the bank would like your total monthly debt to be no more than $2,880.
- Calculating your loan payment. Learn more about how to calculate your potential mortgage payment by checking out my comprehensive Mortgage Information page. By doing some homework before meeting with a banker, you’ll be able to get a pretty good idea of the kind of mortgage for which you’ll qualify.
Highlands, NC Area Properties for Sale
I hope you found the above information helpful as a potential Highlands area home buyer.
Trust me, entering the Highlands area real estate market as an educated buyer is critical to how much success you’ll enjoy on the local housing market.
I also recommend you check out some of my helpful home buying tools, such as:
Until next time,