When it comes to financing a home, where do you start? With the basics! Find out how much home you can afford, what the lending process is like, what you should know—and how NECM can make it all work for you, quick and easy.

Probably the first question people ask when buying a house is, “how do I know how much home I can afford?” Here’s a helpful way to narrow the answer.

Typically, lenders will allow a total housing payment (which includes principal, interest, taxes and insurance) of 28% of the household’s total monthly income.

(Total monthly income x .28 = Total Monthly Housing Payment)

Another equation is your debt-to-income ratio. This means your total monthly payments (your housing payments, credit cards, car payments, student loans, etc.) divided by your total household income. Lenders usually like to see somewhere between 38% and 40% (lower the better).

(Total monthly debt/Total monthly income = Debt-to-income ratio)

These numbers are guidelines only. Depending on your credit scores and payment histories, and the use of new automated underwriting systems, NECM may be willing to go higher or lower on these numbers.

The mortgage application process may seem intimidating, but it’s really pretty straightforward. And working with NECM, we make it even easier.

To complete an application, you’ll need to supply basic information: information about yourself, the property you’re buying and the source of your down-payment.

Personal information

This checklist covers the basic paperwork you’ll need to provide a lender:

• Proof of Identity
  A photo ID is required under the Federal Patriot Act. The lender will also want to know details like your Social Security number, age, marital status, current address and phone number.
   
• Recent Pay Stubs
  Usually the last two will suffice. Some lenders may also want to see your tax returns for the past two years. If you have other sources of income (such as rental, retirement or disability payments, alimony, or child support) bring documents detailing them.
   
• Employment History
  Usually dating back two years. You may be asked to sign a form asking your employer to verify this.
   
• Debts and Savings
  Financial records showing what you owe, and what you’ve saved.
   

Your Purchase

Usually your agent will have supplied the essential information about the property you’re buying to the lender. This includes the address, detailed description, independent appraisal, and a copy of the signed sales contract. If it’s a new home, not yet built or uncompleted, you’ll need a set of architectural plans and specs.

Down-Payment

Finally, your lender will need to know the source of the funds you’ll use for your down-payment, closing costs and other fees associated with the purchase of your new home.