Homeownership is huge endeavor. There are many things to consider before you can decide that you’re ready for the responsibility of taking care of a home and paying for it monthly. This is why the most basic requirement in order to do just that is to determine just how much you can afford. If you’re looking for Miami homes or any other homes in various places in the country, there is an efficient way to come up with an amount you can handle. 

Importance of buying power 

Miami homes are available in a variety of price ranges. If you’re a first-time homebuyer, itâ??s easy to make a mistake in financing, especially if youâ??ve reserved enough or plenty of money for the property you’re planning to buy. Even if you’re capable of paying for the home in its full amount, it doesnâ??t mean you have to. There are still several ways to help you save cash and get the most value for your money. 

On the other hand, if you’re lacking financing, knowing just how much you can afford will give you a good view of the homes that fit your price range. 

Debt-to-Income Ratio 

A great basis for your buying power is the debt-to-income ratio. This is the amount lenders use to identify how much mortgage payment each month you can handle. Therefore if you’re looking for the Miami homes financing and aware of your DTI, lenders can easily determine the maximum amount of loan they can provide. Basically, the DTI is the percentage of debt you are currently carrying as opposed to the money you bring in every month. 

Ideally, the best ratio is something that doesnâ??t go above 36%; more and the lender will typically consider you as high risk. If this happens, they can either deny you the loan or charge a higher interest rate in order to cover their possible future losses. 

In order to obtain this number, the first thing you need to do is to multiply your gross income by .36. Your gross income is generally your total monthly income before taxes. 

Once you obtain the right amount, subtract your total monthly debt payment from it. In order to get your total monthly debt payment, add up all your debt expenses from every loan you are your paying. The difference between your total allowably payment (income multiplied by .36) and your total debt payments will generally be the maximum mortgage payment you can handle. 

However, if the lender you find allows for a higher DTI ratio, think twice before using that as your basis. Even if you’re allowed to borrow a significant amount for your Miami homes purchase, you still have to think about the responsibility it will entail. The wisest thing to do is to always use a lower DTI ratio basis. This way, you’re giving yourself enough allowance and financial cushion in case of emergencies. 

Mark Michael Ferrer 
Miami Homes

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