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Borrowing Power Calculator
Applying for a mortgage requires taking a hard look at your finances. And not just how much you make, but also what you owe and to whom. A bank will scrutinize your numbers in order to decide whether you’re a good credit risk. The better you look to them, the better the interest rate as well. It doesn’t have to be a surprise, you can know before the bank does by using online calculators.
The first step is to know where you stand. Tally everything that you make and all that you owe. Be sure to include periodic bonuses if you get them and figure all amounts by the month. Once you have your totals, search for a borrowing power calculator online. It estimates how much you can borrow, some even the interest rate, based on you income and obligations. This may be rude awakening if you have your heart set on a more expensive home. You can see how that amount will change for the better if you pay off your car or that high interest credit card.
As stated above, a lender will look at your finances to determine whether you’re a good risk. Your debt to income ratio favors high on the list of requirements. And there’s a calculator for that as well. It uses the same information that determines your borrowing power: debt versus income.
There are two parts, front ratio for mortgage costs and back ratio for non-mortgage debt. To get the ratio, divide your total debt payments by your monthly income. The goal is to get that number as low as possible.
If you think that it’s time to purchase a home, you can get your finances into shape by using online calculators and knowing where you stand to get the most for your money.
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