How to determine how much house you can afford
- Posted: October 16, 2019
- By: Nations Lending
House hunting is an exciting time. But before you can start shopping for a home, you need to decide how much you can afford to spend. With so many things to consider, this can be trickier than you think. Here are a few things to keep in mind when deciding what to spend on your home:
First things first—get pre-qualified
The first thing you should do is get get pre-qualified for a mortgage. Nations Lending makes this process easy and fast. When you’re pre-qualified for a mortgage, your lender will give you a general idea, based on your income and expenses, of how much house you can afford to finance.
Decide on a down payment
How much you put down on your home will have an effect on how much you can spend as well. For example, if you’re pre-qualified for a $200,000 home but plan on putting $50,000 down, you can shop for homes up to $250,000.
On the other hand, if you’re putting less than 20%, you may have to pay private mortgage insurance (PMI). This can tack 1.75% of your purchase price to your monthly payment, which can end up being hundreds more a month.
Know your DTI
Your DTI, or debt-to-income ratio, is the percentage of money that goes towards your debts each month. Financial experts recommend that your DTI, including your mortgage, shouldn’t exceed 40%.
Factor in home ownership costs
Home ownership has a number of costs associated with it that you generally don’t have to deal with when renting, such as HOA fees, higher utility bills if you’re moving into a larger home, and general upkeep and repairs.
Don’t be “house poor”
Buying at the top of your budget might mean that you won’t have room for other things you enjoy. Consider these factors when determining how much you can afford:
• Your lifestyle. If you enjoy regular vacations, eat out frequently, or like to treat yourself to monthly shopping sprees, factor that into your budget. Or, decide whether they’re worth giving up in order to spend more on a home.
• Your financial goals. Will buying at the top of your budget keep you from saving for goals like your kids’ college educations or your retirement?
Staying within a realistic budget allows you to enjoy the benefits of owning a home rather than stressing about how much house you can afford. If you’re ready to get pre-qualified, contact a Nations Lending personal mortgage advisor toll-free today at 1-877-816-1220.
Nations Lending uses third-party cookies that help us analyze how you use this website, store your preferences, and provide the content and advertisements that are relevant to you. By continuing to use the site you are agreeing to the use of the Website, which may be located on third party servers or incorporating parts of third party websites and third party mobile applications, and which may interact with or incorporate other third-party services. Nations Lending is not legally responsible for, and does not warrant, represent or guarantee any websites, services, information or anything else provided by third parties. The Services may include advertisements, which may be targeted or general, and other information.
Accept