Spring's arrival means that open houses will be popping up all over the place. Maybe you are ready to buy a home, and you are wondering what you should do first? You have come to the right place because The Hisey-McDermott Team is available to help you find a home that you can afford and that meets your families needs. Before you start falling in love with houses that might be out of your price ranage, you should sit down and figure out how much "home" you can really afford.
For your own peace of mind, embarking on the house shopping journey with a clear understanding of your financial situation will help you avoid disappointment down the line. Review your total household income, consider your savings and then factor in your current debt load.
Financial institutions consider the financial obligations you already have and determine what you can afford. A good rule of thumb is to consider your monthly income and monthly expenses when calculating how much you can afford to be paying out for your home each month. Your mortgage principal and interest, property taxes and property insurance should not exceed 28% of your total household income. Your outstanding debt; including car loans, students loans and consumer debt should not exceed 36% of your monthly income so that you qualify for a mortgage up to 28%.
After you have assessed your finances, your next step should be to get pre-approved for a mortgage. Knowing how much you can conceivably spend on a home, and being able to move quickly to secure financing when you find the right home is the best way to ensure you don't miss an opportunity.
A pre-approval is a simple calculation performed by a mortgage lender, that indicates the amount of money that you'll be eligible to finance through a loan, and what your monthly payment will be.
The price you can afford to pay for a home will depend on several factors including;
Your Credit History
Type of Mortgage
Current Interest Rates
Another factor that lenders consider when evaluating how much money you can afford to spend on a home is the housing expense-to-income ratio. It is determined by calculating your projected monthly housing expense. Each buyer is unique and a mortgage professional can help you find out exactly how much you can widely afford to spend on a home.
Make sure you plan ahead, get all your ducks in a row before you start shopping for a home. The last thing you want to do is find the house of your dreams and lose it because you can't afford it, or can't secure your financing in time before another buyer scoops it up!