How Much Real Estate Can you Purchase?
Debt is financial leverage for private individuals, like you and me. A mentor of mine once said the following, “without debt, you cannot grow.” Essentially, debt allows you to purchase an asset, without the need to pay in all cash.
What can you afford?
Step 1. Understanding how much real estate you can afford based on your current income and expenses. To find your purchasing power, fill in your monthly income and debt. This will determine your DTI ratio and Available Leverage Power.
Step 2. Based on your inputs, the table above provided two figures: DTI ratio and Available Leverage Power. These figures show your ability to qualify for a loan. As discussed above, your DTI ratio must be under 43%. If you have a DTI ratio under 43%, the table converts your leverage into a dollar amount that represents a monthly mortgage payment that a lender would approve you for (Available Leverage Power).
Step 3. Now that you know your Available Leverage Power, use the table below to find your purchasing power you would qualify for. When you use the table below, keep in mind I have included two requirements:
- At least 20% down payment; and
- The interest rate is assumed to be at 4.5%.
Now that you know how much property you can afford (given your DTI ratio and Available Leverage Power), let's search the market to find a property that is within your budget.
This is where I come in. As a team, we will search the market to ensure your property best matches your home criteria.