How Much Home Can You Afford?

Dated: 07/17/2019

Views: 289

“How much home can I afford”?

     This question is asked by almost all buyers, not just first time home buyers. With changing interest rates, homeowner association fees, assessments, and rising home prices, it’s natural to wonder what you can actually spend on a new home. The best way to answer this question definitively is to speak with your lender. They will ask you questions about your income, your assets, your down payment, local property taxes, homeowner insurance, credit ratings, and additional debt. Your loan officer will also talk with you regarding your down payment and current interest rates. Interest rates affect affordability more than most other considerations. As the cost to borrow money rises, the amount of loan available lessens and this means the buyer can qualify and afford less of a home.

     While loan programs vary, there are basic guidelines which most lenders follow. Most conventional loan programs look at two things: the proposed mortgage amount and your total monthly debt obligations. The mortgage payment includes principal, interest, taxes and insurance and lenders expect this payment to be no more than 35% of your monthly gross income. The total debt each month should be no more than 45%. Total debt includes your mortgage payment plus monthly recurring debt such as credit card debt, car payments, student loans, etc. – anything that might be considered long term payments. Combined, these items go into determining how much you can borrow and thus how much you can afford.

     The first step to understanding your specific situation is to find a lender you can trust and talk with them about your needs. 

How much home can I afford?

Blog author image

Cindy Jo Kulp

Positive. Professional. Fiercely Passionate about Real Estate! Specialties: Military Relocation Resource® Seniors Real Estate Specialists® Certified Aging In Place Specialist Short Sale & Forecl....

Latest Blog Posts

2020 Color of The Year

Drum roll please – Pantone has chosen Classic Blue as their color of the year. Over the past couple of years, bold colors on walls have become commonplace in designer magazines and new model

Read More

Down Payments Explained

                                                    A down payment

Read More

Preparing Your Home For The Colder Months

Now that the warm summer months are behind us, it’s time to prepare for winter. Regardless of whether you expect to see sub-zero temperatures this season or you live in one of the warmer

Read More

How Much Home Can You Afford?

“How much home can I afford”?     This question is asked by almost all buyers, not just first time home buyers. With changing interest rates, homeowner association fees,

Read More