Your Buying Power

Your buying power is essentially how much of a home loan you can receive. The simple formula is, the better the loan rate and higher the principal, the greater your power. Your power depends on many things: debt, assets, salary, the current market climate, and the variables that surround your potential new home.

The positive thing about possessing power; is that you can learn to control it. Here are a few simple steps to getting the loan you want by taking control of your buying power. The first thing you want to do is establish the ratio of all expenses you have to income coming in. Twenty-eight percent is the highest you pay fro your mortgage, other debt, loans or expenses should be a maximum of 10 percent. This will help put you in a range that will allow you to have the money you need to purchase the home you want.

Once you calculate your expenses versus income, if you find you exceed the recommended amounts there are a few measures you can take to remedy the situation. First thing is to lower the amount that you owe in debt. It would be ideal to eliminate it, but if that is not feasible, lowering the total amount of debt is a good start.

If decreasing what is going out is not an option, try increasing what is coming in. We know, it is easier said than done. You just can’t magically ask for more money and receive it. If we could, we would all be rich and we wouldn’t need mortgages! But if you are in the process of receiving a raise in your salary, a mortgage lender could look at that as a benefit in your favor.

To reduce your expenses you can heighten the amount of your down payment. More money up front can mean lower monthly payments, thus reducing your expenses. You can increase your down payment the old fashioned way, by saving it, or you can get involved in various payment programs that provide you with down payment options.

Creative and strategic thinking are the keys to increasing your buying power. Look at the big picture to help bring the power back to you.