common guideline for determining how much house you can afford is the 28%/36% rule. This rule suggests that you should allocate no more than 28% of your gross monthly income toward home-related expenses, such as your mortgage, property taxes, and insurance. Additionally, your total debt obligations—including your mortgage, credit cards, auto loans, and student loans—should not exceed 36% of your gross monthly income.

By following this rule, you can maintain a comfortable balance between your mortgage payments and other financial commitments.

A mortgage is a loan agreement between you and a lender that allows you to borrow money to purchase a home or borrow against the equity in a property you already own. In exchange, the lender holds the right to take ownership of the property if you fail to repay the loan, including interest. Essentially, a mortgage secures the loan with your home as collateral.

To qualify for a reverse mortgage loan you must own a home, be at least 62 years old and have enough equity built up in your home. The loan works by the lender making payments to the borrower based upon a percentage of the equity that has been built up in the home over time.

To get pre-approved for a mortgage, follow these steps:

• Check your credit score: Start by reviewing your credit score to understand where you stand before contacting lenders.

• Review your credit history: Ensure your credit report is accurate and address any issues that might affect your approval chances.

• Calculate your debt-to-income ratio (DTI): Lenders typically look at your DTI to assess your ability to manage monthly payments. Knowing your ratio can help you understand what loan amount you might qualify for.

• Gather necessary documents: Prepare your income statements, financial account details, and personal information to streamline the pre-approval process.

• Reach out to Dayo to help you navigate acquiring your Home.

Refinancing can be a smart move, especially if it allows you to lower the interest rate on your existing loan. Traditionally, the rule of thumb has been that refinancing is worthwhile if you can reduce your interest rate by at least 2%. However, many experts now suggest that even a 1% reduction can provide significant savings and make refinancing a good option.

Mortgage insurance protects the lender by reducing their risk, allowing you to qualify for a loan you might not otherwise be eligible for. Typically, if your down payment is less than 20% of the home’s purchase price, you’ll be required to pay for mortgage insurance.

A common guideline is to follow the 28/36% rule. Most financial experts recommend that no more than 28% of your gross monthly income should go toward housing expenses, and no more than 36% should be allocated to total debt, including housing, student loans, car payments, and credit card debt. Following this rule can help you maintain a healthy balance between your mortgage and other financial obligations.

The type of loan you choose depends on your long-term plans.

• Fixed-rate loans are ideal if you plan to stay in the home for many years. A 30-year fixed-rate loan offers stability and predictable payments, providing flexibility to manage other financial goals.

• Adjustable-rate mortgages (ARMs) come with more risk but can be a good option if you plan to sell or refinance soon, as they often offer lower initial interest rates.

Choosing the right loan depends on your financial situation and future plans.