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House Hunting? Use These Basic Guidelines to Determine How Much House You Can Afford

House Hunting? Use These Basic Guidelines to Determine How Much House You Can Afford


House Hunting? Use These Basic Guidelines to Determine How Much House You Can Afford

It’s exciting when you take the plunge and begin searching for a new home. With so many options, it can be difficult to decide which is the right choice for you. One of the biggest mistakes homebuyers can make is stretching to buy a home they can’t really afford. This ends up strapping them financially for years.

A smart way to narrow your choices is to determine what you can afford before you even start your search. If you’ve already got a list, cross off the ones that are out of your budget. Use these basic guidelines to help you determine how much house you can afford.

How Much Money Do You Make?

Your income is the single biggest factor in figuring out how much you can afford to pay for a house. Think about your gross and your net income per month. Take into account your job stability, the amount of overtime you work, and any bonuses or commissions you receive. Is your income steady or seasonal? The more money you make, the more you can typically spend for a home.

What Are Current Interest Rates?

An annual percentage rate (APR) has a big impact on how much house you can afford. The lower the interest rates, the less you will pay for your mortgage loan. Even a fourth of a percent can make a big difference in your monthly payment and the total you’ll pay on your mortgage over 15, 20, or 30 years. Read up on the mortgage rates, so you can prepare yourself for the monthly payment.

How Much Savings Do You Have?

It’s good to have money socked away. A hefty nest egg makes a great down payment, giving you the ability to afford more house. If you’ve not been great at saving, you may need to use a loan type that doesn’t require a big down payment — but you’ll need to pay a bigger monthly payment. Take stock of your money in the bank and stock market and decide how much you’ll be using for a down payment. That number will give you a better idea of how much home you’ll be able to afford.

How Much Debt Do You Have?

A key element in your homebuying picture is your debt load. The more you owe, the less you can borrow for your home. Lenders look at your debt-to-income (DTI) ratio. This calculation takes all of your monthly debt obligations and divides the total by your gross monthly income. The lower your DTI, the better off you’ll be when you apply for a mortgage loan. If you have lots of credit card debt, an expensive car payment and student loans, you won’t be able to afford as much house as a person who makes the same amount as you but carries little or no debt.

What Else Do You Spend Money On?

This isn’t figured into any calculation, but it’s important all the same. Do you have expensive pastimes and hobbies? Do you like to travel? Do you enjoy expensive evenings out? Are you always ready to attend the latest concert or go golfing? If so, you may need to consider trimming back how much you spend on your house. The last thing you want is to buy a house that keeps you from having the funds to enjoy what you love doing.

How Good Is Your Credit?

Your credit score will play a significant role in qualifying for a mortgage, which dictates how much house you can afford. If you’ve managed your credit wisely and have an excellent score, you’re more likely to get approved for a bigger loan with better terms than those who have paid their bills late and maxed out their credit cards. When your loan officer pulls your credit, make sure you look at your credit score. This will give you an idea of how much house you’ll be able to afford.

Get Prequalified

Figuring out how much you can comfortably spend on a house is essential before you start your homebuying journey. It keeps you on the right track and helps you avoid falling in love with homes out of your price range. For the best chance of getting that home you love AND can afford, get prequalified for your mortgage. Providing proof to the seller that your lender has verified that you can afford the mortgage will give you a leg up on the competition. Contact us to start that process today.

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Mortgage Investors Group, based in Tennessee, offers residential financing in a number of states in the southeast, See MIG Service Areas. Terms and conditions to apply to home financing. We want to share with you the loan terms vary based on several characteristics and your financial profile. These include but are not limited to loan program, loan purpose, occupancy, credit history, credit score, assets, and other criteria per loan type. The repayment terms and interest rate may vary from time to time. The terms represented here are based on certain assumptions outlined below and/or noted on the loan outline page. Additional details concerning privacy, program disclosures, licensing specifics may be found at migonline.com Legal Information.

MIG Loan Officers will help gather the information needed for an individual assessment to provide home financing which matches the loan characteristics with your home financing needs based on your financial profile, when you are ready to begin a full loan application. For estimates and general information before that step, the basis for which the mortgage financing information are as follows:

  • Rates are subject to change at any time.
  • Rate locks are available at current terms for 30 to 180 days based on program type, credit profile, property location, etc. which will affect the available rate and term.
  • Rate locks are available at current terms for 30 to 180 days based on program type, credit profile, property location, etc. which will affect the available rate and term.
  • Payments will vary based on program selection, current rates, property location, etc.
  • Not all programs are available in all states.
  • Some loan programs may not be available to first time home buyers.
  • Terms and conditions apply, which may include restrictions or limits per loan program.
  • Information is generally based on primary residence occupancy with no cash out when refinancing.
  • Unless otherwise stated, terms shown are estimates based in part on credit score of 700 or higher; owner occupancy, escrow account is established for taxes and insurance(s); debt-to-income ratio no higher than 43.0%; PMI applies to conventional loan programs over 80.0% LTV; VA,FHA & RD require insuring fees included in loan and/or payment; fixed rate, 30 year term.

An MIG Loan Officer is available to help with your financial details to determine which characteristics apply to your situation for a personalized look into which loan program best fits your home financing needs. Please use the Find a Loan Officer link or reach out to Mortgage Investors Group at 800-489-8910. Equal Housing Lender 1.2020