How do I know how much to borrow?

Updated March 13, 2023.

The amount you borrow depends on the amount you need as well as the value of the property being purchased. Most mortgage lenders will only agree to loan a percentage of the value of the house (known as the “debt-to-equity ratio”). Other types of loans and lenders allow the buyer to borrow the entire purchase price and sometimes even more, to cover closing costs and expenses. Remember that the size of the loan, the length of the loan and the interest rate all go into determining the size of your monthly payment. Also, when determining if you can afford a house, and the mortgage required to buy the house, it is important to realize that the purchase price is just one of the expenses involved. Taxes, insurance, utilities, maintenance costs and other necessary expenses are often overlooked.

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