Are you in the market to buy a new home? Whether you are an experienced owner or a first-time buyer, you will want to know how much house you can afford.
There are many factors to consider when determining your budget for a new home, but let’s take a look at three of them.
- Your Estimated Down Payment and Closing Costs
Before you can figure out the maximum amount of mortgage you qualify for, it is important to know how much it will cost you for a down payment and closing costs.
Depending on several factors, including your credit score, income to debt ratio, loan type, purchasing points, or paying other fees, you will be able to find out how much money you need before you can close on the property.
- Your Budgeted Monthly Payments
The amount of house you can afford depends on your budgeted monthly payments, which includes principal and interest payments and homeowner association dues (HOA), if any. If your dream home has an HOA, be sure to include it in your total monthly housing costs.
Consider the interest rate as well. A low interest rate can make a big difference in your monthly payments.
- Your Debt-to-Income Ratio
One final factor is your debt-to-income ratio, which is the amount of money you pay toward monthly living expenses, including mortgage payments, HOA, and utilities.
Your lender will want to ensure that enough funds are left over for your family to live comfortably each month. Your debt-to-income ratio will be calculated based on your expected monthly housing expenses, which can include mortgage payments.
While these three factors are important, they do not tell the whole tale. Your lender will consider many other factors, including income stability and job tenure, to determine how much house you can afford.
If you’re ready to find out if buying a home is right for you, contact your local real estate agent or lender. A qualified professional can help you find out how much house you can afford and walk you through every step of the process.