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If you're like many Americans, your home will be the most expensive thing you own. It will be a key part of your estate as you plan for the long term. So you need to think strategically from the outset.

To start with, if you want to know how much of a mortgage lenders think you can handle, get preapproved for a mortgage before you start shopping for a home.

What is preapproval? That's when you work with a mortgage lender to determine how large of a loan that lender is comfortable giving you. To begin, you'll provide a lender with copies of your last two paycheck stubs, last two months of bank account statements, last two years of tax returns and last two years of W-2 forms.

Lenders will study these forms to verify your monthly income. They'll also check your credit to determine how well you've paid your bills and managed your debt in the past.

Armed with this information, lenders will provide you with a preapproval letter stating how much of a mortgage you can qualify for. For instance, your lender might determine that it is comfortable giving you a mortgage of $400,000.

Once you have this letter, you can shop for homes that you know you can finance. You won't waste time looking at $500,000 homes if you are only qualified for a mortgage of $400,000.

The good news is you won't have to pay for getting a preapproval. You only pay a lender after that lender originates your mortgage loan and you sign the closing documents. You also are not required to apply for your mortgage with a lender that has given you a preapproval letter. You can still shop around with different lenders.

But how much are you comfortable paying each month?

Knowing how much a lender is willing to lend you is one thing. Being comfortable with the size of a monthly mortgage payment is another.

Just because a lender will approve you for a mortgage of, say, $375,000, doesn't mean that you'll be comfortable making the monthly payments that come with a loan of that size.

Most lenders say that your total monthly debt, including your new estimated mortgage payment, should equal no more than 43% of your gross monthly income, which is your income before taxes are taken out.

Know your budget

But even that is a guideline, and  not a hard-and-fast rule. You might not want to spend 43% of your gross monthly income on debt payments. You might feel more comfortable spending 36% or less of your income.

The key is to create your own household budget, listing your monthly expenses and income. Make sure to include expenses that vary each month, such as your utility bills, medical expenses, groceries and gas costs. Include, too, discretionary spending, estimating how much you spend each month on eating out, going to the movies, shopping and other entertainment expenses.

Once you've calculated this, you can see how much money you have available to spend each month on your mortgage payment. Be careful not to take out a mortgage that will result in a monthly payment that will consume all your extra cash. You don't want paying your mortgage bill to be a financial burden each month.

Only you can determine how large of a mortgage payment you are comfortable taking on. Considering the 43% debt-to-income rule and getting preapproved can help you make that decision. But drafting a budget to determine exactly how much extra money you have each month is a key step that you should never skip.

Posted by Wolf Parlar

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What our clients are saying  

Mr. Parlar is one of the most ethical and honest agents I have ever worked with! I have used many agents in my 20 year Real estate investing and I must say, after meeting him online a few years back, I only use his service and handle my financing needs through him whenever I need to obtain financing. I appreciate his care and handling of transactions as though it's his own. I highly recommend him to anyone who want to use his service. Bought in Los Angeles, CA and West Hills CA and sold in Palmdale, CA and Frazier Park CA.

 

~ Michael A. Murtada

We have found Wolf via internet and usually we don't use companies that were not personal referrals, but from very beginning, Wolf came across so professional, very knowledgeable and very honest, that we felt comfortable doing business with him. He helped us sell our townhouse and we were very happy with everything - his response time to our questions, the way he handled the buyers and their agent, his negotiations skills/opinion/input on the deal. We would absolutely recommend his services to our family, friends and others. Sold in Calabasas, CA Sold In West Hollywood, CA Bought in Marina Del Rey, CA

 

~ Lara Goldberg

We listed our property for sale with Wolf. It was our first experience selling. We interviewed brokers in our area to list, and found Wolf to be very professional and knowledgeable, putting us at ease. After signing the contract, he made the process very streamline and simple. Wolf has an excellent team, from photographer to escrow. He was able to get multiple offers within days, and we are very happy with the selling price. I highly recommend Wolf, as he has been a great asset to us! Bought in Long Beach, CA

 

~ Gary Gwin

Wolf was there for me every step of the way. He was reliable, knowledgeable, and very good at what he does. My investment property is beautiful and the transaction went smoothly from beginning to end. I highly recommend him and look forward to working with him again in the near future. Bought in Los Angeles, CA

 

~ Alex Evan

I would highly recommend Wolf V. Parlar after my experience in buying our new condo. RESPONSIVE, RESPONSIVE and did I mention RESPONSIVE. During our search we came in contact with numerous agents but Wolf was the one that made himself available 24/7. He was always a phone call, text, email or meeting away. He was knowledgable, very well prepared and anticipated our needs through the whole process. He gave guidance and strategy throughout our offer and counter offer. He was "on it" from start to finish and always generous with his time. We closed escrow several weeks ago and this morning received an email from him following up and making sure we are happy, which we are. Wolf is dependable and very professional, and I would happily recommend him. Thank you, Wolf! Sold in San Pedro, CA and Bought in Huntington Beach, CA

 

~ Hyun Joo Kim

Wolf had contacted me a couple of years earlier, when I was considering buying a home. He was very knowledgeable and helpful. When I was ready to buy a home, I got into contact with him again. His knowledge helped me go through the process smoothly. He came to show me the property and offered useful insight into the neighborhood. He then negotiated down the sales price. He also brought his home inspector after the offer was accepted. We were able to get some money for the repairs. The escrow closed in about a month. Wolf does his paperwork with electronic signatures, which speeds up the process. The overall process was smooth and efficient, thanks in large part to Wolf. Bought in Paramount, CA

 

~ Gokhan Esirgen

It was an absolute pleasure working with Wolf (and Will!) during the entire buying process. Customer service was excellent (prompt response, very knowledgeable of the market and he negotiated on my behalf so I didn't overpay for my property, in fact, I saved $5k+). We looked at many homes together and he pointed out all of the flaws of the homes; it definitely shows that he cares and isn't looking to make a quick commission. Even when I wanted to make an offer on a home, he would advise me to keep looking because he knew there was something better out there. And he was right because we just closed on a beautiful home! Truly truly truly happy with the service that he provided. I would recommend him to everyone I know. Bought in Hawthorne, CA

 

~ Nancy Phan

I would highly recommend Wolf V. Parlar after my experience in buying our new condo. RESPONSIVE, RESPONSIVE and did I mention RESPONSIVE. During our search we came in contact with numerous agents but Wolf was the one that made himself available 24/7. He was always a phone call, text, email or meeting away. He was knowledgable, very well prepared and anticipated our needs through the whole process. He gave guidance and strategy throughout our offer and counter offer. He was "on it" from start to finish and always generous with his time. We closed escrow several weeks ago and this morning received an email from him following up and making sure we are happy, which we are. Wolf is dependable and very professional, and I would happily recommend him. Thank you, Wolf! Bought in Hollywood, CA

 

~ Joan Dyer

With regards to selling of my property in Culver City, California Mr. Wolf Parlar and Parlar Realty Company has demonstrated excellent organizational and negotiation skills during the opening and closing processes for the sale of my condominium. Based on his honesty and attention to detail I have no hesitation to recommend he and his company to other potential real estate buyers and sellers. Sold in Culver City, CA

 

~ Eugene Meyer

Amazingly responsive and highly intelligent real estate agent of our dreams. Wolf fought and negotiated for us, and used his savvy expertise to help us move seamlessly from our original home to the house of our dreams. He was available night and day, and explained any doubts we had very thoroughly. He scoured the listings for us, and was immediately available to show us any properties we asked about within hours, not days. His connections within the industry made our successful offer on the house we wanted possible. Through his skillful negotiation, he helped to convince the seller of our new home that we were the family to choose. He was outstanding from start to finish, and we would recommend him without hesitation. THANK YOU WOLF! Bought and Sold in Los Angeles, CA

 

~ Lynn Ellias

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