So you’re in the market for a new home. That’s excellent! The question now is…how much home can you afford? To ensure that you have the funds available, creating a budget is a key step in the home buying process. You might be surprised to know that owning a home does not require as much money as many people think. With some mortgage loans and certain rates, a monthly mortgage payment can be less than a monthly rent payment, plus you’re working towards owning an asset instead of simply borrowing the living space!
When trying to understand how much home you can afford, what you are really determining is the maximum monthly mortgage payment you can comfortably pay. There are several pieces of data that need to be factored in to calculate how much home you can afford. The very basic information includes your yearly income, monthly debts owed and the down payment you expect to put on the house. Based on these three numbers, you can come up with a rough estimate of the maximum home price you could afford within your current budget.
To get a more accurate and precise number, you will need to take into account detailed information about the new home you are looking to purchase and the mortgage loan that would go along with that. In addition to the down payment, you need to gather the homeowner’s insurance you will be paying, the real estate taxes for the area into which you are moving, and any homeowners’ association dues, if applicable. When it comes to the mortgage loan, you need to know the specific interest rate and the term, or the number of months you have to repay the loan amount.
Have questions about the mortgage process? Contact The Allison Fishwick Team and we can discuss the mortgage process and put you in contact with a knowledgeable lender!