DETERMINE HOW MUCH HOME YOU CAN AFFORD

The best way to start your home buying process is by determining your budget. After all, this can be complex enough without looking at homes that are outside your price range. And who wants to fall in love with something that’s unattainable?

 

By identifying a realistic budget, you can embark on your search with a firm understanding of your price range. Getting Pre-Approval early on in the house hunt can help you figure out what your buying budget is and help you set realistic goals.

 

Here are some ways to help determine how much home you can truly afford:

 

• First you’ll need to determine your Debt to Income Ratio

• which is just what it sounds like – your monthly expenses versus your monthly cash intake. This includes all the bills you have to pay, divided by your gross monthly income.

 

• When you consider your debts, include any recurring bills, such as:

• Student loans, car payments, child support payments – anything that you pay on a monthly basis.

 

• To secure a qualified mortgage from most lenders, your DTI should be no higher than 43%. But remember that’s the “outside” number you can spend – and it doesn’t mean that you necessarily should.

 

Have you ever heard of being house poor? 

 

That means that you spent so much money on your home that you don’t have funds left over for activities, such as eating out or traveling, or even the many expenses that will come on top of your mortgage. 

 

You’ll want to budget for the fun stuff, like furniture, fresh paint and plants for your new patio pots, but also the “unfun” stuff that inevitably comes along with homeownership, such as routine maintenance and even unexpected big-ticket items like a new hot water heater.

 

By building some breathing room into your budget, you’ll be able to enjoy your new home without having it become a source of financial stress. This handy home affordability calculator will give you a great place to start!

See What You Qualify For