WEBVTT

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[ Theme Music ]

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One of the first questions

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many homebuyers ask is, how much

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can I afford?

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Buying a home is one of the

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biggest financial decisions

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you'll make, and you will want

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to stay within your budget.

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Many factors affect the price

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range you should consider,

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including the size of your down

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payment and the loan amount you

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may qualify for, the types of

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loan options available to you,

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your current debts and credit

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history, and the property value

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of the home you are considering.

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Your lender wants you to be a

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successful homeowner, and so to

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assess whether you qualify for a

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mortgage large enough for the

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home you want, he or she will

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consider your entire financial

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picture.

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First, lenders want to know that

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you have a source of income to

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make monthly mortgage payments.

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Income can come from primary,

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secondary, and part-time jobs,

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as well as overtime, bonuses,

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and commissions.

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You may use other sources of

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income if you want them

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considered for payment --

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including retirement or

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veteran's benefits, disability

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payments, alimony, child

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support, and rental or

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investment income -- provided

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they can be verified as stable,

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reliable, and likely to continue

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for at least three years.

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Your lender will also examine

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your current debts, payment

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habits, credit history, and

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credit score.

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They want to confirm that you

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pay your bills, loans, credit

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cards and other debt on time and

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that you don't have excessive

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levels of outstanding debt.

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It's a good idea to check your

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credit history and correct any

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problems before applying.

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You can get a free credit report

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annually at

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www.annualcreditreport.com.

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Your lender will also review

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your assets and available funds

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to see if you have enough for a

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down payment and closing costs.

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You may use funds from a savings

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account, certificate of deposit,

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investments, or retirement fund.

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In some cases, you may be able

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to use a gift from a relative,

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friend, employer, or

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not-for-profit organization.

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In many cases, you will also

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have to demonstrate that you

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have additional funds in your

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accounts to cover several months

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of mortgage, tax, and insurance

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payments.

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And finally, your lender will

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look at the property itself to

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verify that it's worth the

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purchase price.