When you want to buy new clothes, you simply go to the store, make your selection and pay cash or credit. Buying a new home, because of the price tag, is a lot different.
Few people have the ability to go shopping, choose a house and pay cash.
Rather, most people pay a cash down payment on their new home and finance the remainder of the purchase price with a mortgage loan. A mortgage requires you to pledge your home as the lender s security for repayment of your loan. Since financing is a key issue in most sales contracts, one of the first things you should do is to figure out how much house you can afford how large of a mortgage loan you qualify for. Lenders use certain guidelines to determine the mortgage amount they will lend you. The two guidelines used are housing expenses and long-term debt.