Have you ever asked yourself this question: How much house can I afford? If you did, and are still wondering the answer, it will be answered here.
How much you can afford consists of two major things: How much down payment you can make and how much money you would be able to borrow. Most experienced homebuyers know that the first step in looking for a new house is taking an objective look at the finances. Determining the amount of money you can allocate to your home buying will affect almost all aspects of purchasing.
Here are several things to remember in considering how much you can afford for a home:
1. Figure out your income. This means deducting your taxes, social security withholding, retirement contributions and other debts such as credit cards, and anything else taken from your paycheck. Also, deduct your monthly expenses. What is left of your income is the maximum amount you can spend for a new home.
2. Determine how much cash is available for the down payment. The amount you have for a down fee will affect the kinds of loans you can qualify. If you have a fair amount of money, it is better to make a higher down payment as possible to lessen the interest rates on your home mortgage.
3. Your readiness to write a check for the earnest money. The earnest money mentioned here is a deposit in cash made to the seller to secure an offer to purchase the property. This amount is usually forfeited if the buyer withdraws his offer for the home.
4. Find out how much cash you can spend to pay the closing costs. These costs are associated with closing the deal on a house. These fees are divided between the buyer and the seller.
5. Determine the maximum mortgage payment you can afford every month. Usually, lenders will use the 28/36 rule to find out the maximum mortgage payment that suits your budget.
6. Do not rely too much on your mortgage lender to tell you what you can and cannot afford. Mostly, they want to get you a loan and make as much money as possible. There may be qualifications in getting a loan, but most lenders will lend you more than you are comfortable.
7. The best way to buy a home is the 100 percent down plan! It might sound absurd, but think how much comfortable it would be if you do not borrow money. However, if you cannot wait to save that much to get a home, try making a big down payment of about twenty-percent, to make your loan amount and the interest lesser. You can also choose a 15-year fixed-rate mortgage.
There is no such thing as a magic amount to look for regarding the quest for the "perfect home". The house you can afford is as unique as you are. It is based on many factors, not just the price but also the location, preferences and most of all, the home-buying plan you have in place.