Did you know there are some simple tricks that you can implement to allow you to afford much more home WITHOUT increasing your income? Kyle Whissel with the Whissel Realty Group shares some of the top hacks on ways to move money around which can help you afford a more expensive home. As always, speak to your lender first – if you need to get in touch with someone you can trust, reach out to us.
Here is a very simple technique on how to be able to qualify for a more expensive home without getting more money. When you’re buying a home, the amount the lender will qualify you to purchase is all based on two things, the total debt that you have every month, and the total income that you have every month. And there’s a ratio between those, known as a debt to income ratio. So the more income you have, the less debt you have, the more home you can buy. Pretty simple, right? Well, how can we make some small, little changes to either increase the income or decrease the debt?
Well, increasing the income’s kind of hard. Unless you get a new job or win the lotto, we can’t really play with that income number a whole lot. But the debt number, we can. And so one of the things that we want to do, and one of the reasons that, you know, our team and a lot of realtors will say, hey, we want to have you sit down and connect with a lender first and then we’ll go look at homes, one of the reasons is, we want to have that lender pull a credit report and we want to see all of your debts that are on that credit report.
Because what we’ll find is that a lot of times, if we can pay something off, typically a car is one of those things, if we can pay a car off and we can completely eliminate that debt, it allows us to afford a lot more.
I’ll give you a perfect example of that. I have a truck right now. My payment, I’ve had the truck for a long time, is like $600 a month. I only owe like $12,000 on that truck. So rather than putting an extra $12,000 on my down payment, if I took that same $12,000 and paid the car off, what that would allow me to do, that extra $12,000 I put down is probably going to allow me to afford $12,000 more house. But if I put the extra $12,000 and I pay the truck off, I’m eliminating that $600 a month truck payment.
Therefore, my debt goes down and now my debt to income ratio becomes more attractive. Well, that $600 a month that is now gone will allow me to afford potentially $100,000 more on the home that I purchase. So if you have it, don’t put the $12,000 on the down payment, use the $12,000 to pay the truck off, and now I can afford $100,000 more home. $12,000 more, $100,000 more. Makes a lot of sense, right? So that’s the importance.
We want to have you sit down with one of our preferred lenders so they can go through this exercise with you, because a lot of times, making a, you know, small change, instead of moving the $12,000 here, moving it over here, you might be able to afford another $100,000 and get the home of your dreams. Hopefully you found this tip valuable. If you are thinking about buying, you want to connect with one of our preferred lenders to go through that exercise, I’d love to make that connection. Give me a call, 619-618-7997.Search Homes For Sale in San Diego