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Determine How Much You Can Borrow
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There is no strict formula used by all lenders to determine a home
loan amount, but a good working rule of thumb is that you can afford a
home equal in price to three times your gross annual income. This
formula, of course, needs to be adjusted to a number of factors:
- Amount of available cash for a down payment
- Closing costs and cash reserves required by the lender
- Your outstanding debts (your total debt to income ratio should be
under 40 percent)
- Your credit history
- The type of mortgage you select
- Current interest rates
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