Your Financial Picture
A small but growing number of financial experts are recommending that you save your money and pay for your home in-full. For many, that seems unrealistic. The vast majority of homeowners borrow at least a portion of the funds necessary to make their purchase.
Banks will want to take a look at your overall financial picture before deciding how much they're willing to lend you. Your income factors heavily in their decision, but so does the amount of debt you have. And it's not just credit cards -- school loans, car loans and any other money you've borrowed counts toward your total debt. Most mortgage lenders want to see your debt-to-income ratio below 36 percent, which means your debt doesn't exceed 36 percent of your yearly income. Some mortgage lenders may make an exception, but that exception will cost you in terms of a higher interest rate. And such exceptions are increasingly rare.