Military Homebuyer Colorado Springs January 2014 | Page 11

GET STARTED

LOCAL

CULTURE

VA LOAN

How Much
Can You Afford?
BORROWERS SHOULD BE REALISTIC ABOUT THEIR
FINANCIAL FOOTING
What's in the Budget?
The first step to knowing what you
can afford is to know your current
budget. What are you earning? How
much of it are you spending, and what
are you spending it on? If you can’t
confidently answer these questions
now, set aside an evening to map out
your budget.
Veterans can get a solid sense in the
beginning of how much they qualify
for in terms of a loan amount. But
what you can get and what is truly
affordable can sometimes be two
different things.
A home is a significant commitment,
and living on the edge financially can
prove disastrous for military borrowers
and their families.

At the outset, be open and honest
with yourself and your VA loan
specialist about your finances, your
debts and how much is too much.
Determine what you can afford and set
firm, realistic limits before you start
shopping for a home.

What Do The Experts Say?
While you're creating or revising
your budget, take a look at the
pie chart below, which illustrates
some commonly suggested budget
guidelines.
As you can see, the majority of
income goes to housing, then general
living expenses such as food, utility
bills and entertainment. Tied for
third place are general debt and

SUGGESTED MONTHLY SPENDING

WELCOME

HOMEBUYER

transportation, followed by savings.
These guidelines are a good place
to start, but remember to look at
your unique situation. Perhaps you
have significant student loan debt or
you’re planning to relocate to a more
expensive part of the country. Debt
levels and housing costs can play a key
role in determining what is affordable.

What’s Your DTI?
Once you’ve got a clear picture of
your monthly budget, make a simple
calculation: Take your monthly income
and divide it by your monthly debt
payments and expenses. The result will
be your debt-to-income ratio (DTI), a
key tool for measuring a borrower’s
financial health and flexibility. Service
members and veterans with a DTI ratio
greater than 41 percent may need to
meet additional requirements in order
to secure a loan.

What’s It Going To Cost?
Monthly mortgage payments cover
more than just the amount borrowed.
The best way to remember your total
obligation is the acronym PITI, which
stands for principal, interest, taxes
and insurance.
Good mortgage calculators will
estimate these factors for you, but be
sure to talk with your VA loan specialist
for a more complete picture.

What About The Long Haul?
A mortgage is a long-term
commitment. The most common
loan term is 30 years, although some
borrowers opt to pay off their loan
faster with a 15-year term. Consider
where you are in your life and the
potential obligations and challenges
(marriage, children, job stability and
so on) that await. You don’t need a
crystal ball to secure a loan, but it’s
important for prospective borrowers to
be confident in their ability to make
on-time mortgage payments for the life
of the loan.
This is general advice. Consult with a financial expert, loan expert, etc.

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Colorado Springs Homebuyer

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