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A mortgage is a bank loan used to purchase a home. Banks have different types of mortgages, and the total amount you can borrow will be based upon a number of factors.
Annual Income
Generally, banks will not give you a mortgage that will be more than 33 percent of your total monthly income. For example, the bank will look at the cost of house insurance, rates and taxes and the mortgage payment, and that monthly figure shouldn't be more than 33 percent of your income. (If you have a higher down payment, you may be able to buy a house with a higher value.
Credit
Even if you make enough money to comfortably make the monthly payments, you are unlikely to get a mortgage if you don't have good credit. Many banks require a minimum credit score needed to qualify for a loan.
Down Payment
Most banks want to see a down payment of at least 10 percent of the purchase price of a house. However, there are programs that will assist with down payments, requiring as little as 5 percent down.
Appraisal
Even with qualified credit and income, if the house appraisal determines that the value of the house is less than the purchase price, the bank will often not underwrite a mortgage loan.
Considerations
If you are purchasing a home with another person as a co-signer, the bank will take into consideration both incomes and credit scores when determining the total amount you are eligible to borrow.
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Mortgage Calculator
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