Hi Lisa, what a conscientious buyer! I had an old armenian friend who used to say " What is a bargain", and his answer was: "your ability to buy!" I live by that today. In any event, the lender factors your purchase amount by the documents you provide. They look at your income, your debt ratio, and come up with the numbers. Your mortgage INTEREST is a tax deduction. If you are in a high income bracket then it helps you to not have to pay Uncle Sam in the tax year. Taking a higher payroll deduction also helps you obtain more cash in your paycheck to help pay for a mortgage which again is offset some by the tax deduction. Additionally you want to be certain you know which type of loan that you have. Is it an impound account loan that includes your taxes and insurance payment through the escrow account or are you making those payments separately? Good Luck, CIndy, Prudential California Realty, Riverside

Lisa:

Please also reference my answer to your other question about the tax advantage of home mortgages.

This is what I tell all my buyers and I hope it will help you make a great decision as well. When a mortgage company qualifies you for a loan, they do it based on your income and your debt and a generic cost of living assumption. Not all of us are generic. Lenders do not take into consideration life style choices like private school for the children, music lessons, tithing and other charitable contributions, etc. You should never buy "as much house as you can". You should buy "as much house as you are comfortable with". You do not want to break into a sweat or feel nauseous every time you write the mortgage check. So if you know that you spend $500 a month on personal choice items that the average person does not, have your lender recalculate your loan qualifications taking this into consideration. That way you will know how much home you can comfortably afford.

This is a GREAT QUESTION, and one that more people should be asking and considering as they look to buy a home. With your insight, I am sure you will be a successful and happy homeowner. Dare to Dream.

Shel-lee Davis
Real Estate Consultant
RE/MAX Palos Verdes Realty

Welcome to Trulia

I am a Texas Loan officer /realtor we place all the info. into a formal based on a number of your financial documents you have supplied. However you dont have to purchase a $280K home tell the mortgage broker what your comfort level purchase they can then tell you want you would be in the ball park to purchase with the estimated monthly amount. GREAT QUESTION ! http://www.lynn911.com http://www.homes-for-sale-dallas.com

"Lisa" - in a nutshell, your credit, income and assets are the evaluations made to preapprove your loan on any FHA/VA, Fannie Mae or Freddie Mac loan. By providing your documented income (tax returns and pay stubs), running a credit report and evaluating your debt to income ratios, most lenders should be able to give you their professional estimates for your qualifications. You might very well qualify for more house payment than you desire to pay each month!
As it pertains to the debt ratios, there are no hard facts to the maximum acceptable debt ratios on a loan by loan basis. You might read about maximum loan ratios (debt to income ratios; front end ratios; back end ratios) but there is a little more that goes into the mix than just ratios. Good credit, good employment history, liquid assets and the ability to make a down payment and/or closing costs will definitely factor into your preapproval.

You've certainly asked a great question, Lisa......be sure to ask your mortgage company how they arrived at your preapproval numbers, too. The answers they provide should give you a peace of mind about what criteria they have used to preapprove your loan as well as your payment affordability.

Ryan