How Do I Know How Much Home I Can Afford?
If you are considering a home purchase, there could not be a better time to ask yourself the question of how much house you can afford. Housing prices are rising in many places all across the country and in some areas like in Seattle you may find yourself in a stiff competition with other buyers. There could not be a better time to assess what you can afford and what you truly want in a home.
How do you figure out how much house you can afford? There are many great mortgage calculators out there on a number of sites that deal in real estate including Zillow, MSN, and more. These are some of the questions that the calculator will ask:
- Income and Expenses: the calculator will want to know your annual income, if you make child support payments, have a car loan payment, credit cards carrying a balance, any monthly club memberships or association fees, and any other monthly obligatory payments.
- Mortgage Assumptions: next you will put in the projected amounts you will pay. If there is a home you have found that you are interested in you can punch in the pricing information for that property. You will be asked to provide the mortgage term you want, the interest rate you hope to pay, the down payment you can make on the home, the estimated property taxes, and annual insurance cost( this can be a complete estimate)
When all of these things are put into the calculator you will get a result of the amount you will be able to afford according to your income and expenses. Lenders will usually cap the maximum amount of your mortgage payment at 28 percent of your gross monthly income.
What Do You Do if You Can’t Afford the Home You Want?
- Purchase with a Friend or Other Partner: If you are purchasing a home on your own consider purchasing a home with a friend or family member. You can share the home and the burden of payments and all other expenses together. This will also give you a larger down payment when you both agree to pay half. This is a big step to take with someone so you want to be sure you truly know and trust your partner in home purchasing.
- Look For a Cheaper Home: This one seems like the obvious response to the question above. If you have lofty dreams of buying a big property consider the less is more mindset for a while to help build your finances for a future home. Ask yourself how much home do you truly need? If you can get by with a smaller home that is in an affordable price range it may be a place to start. If you are not interested in a starter home and have your sites set on a larger or more expensive property you can always postpone your home buying plans until you have saved more money.
- Wait: As stated above waiting is a good option if you have your heart is set on a certain type of home. Continue to put money aside for a home, the larger your down payment the less money you need to borrow and the lower the monthly mortgage payment. You may also find in that time you take saving up that your home needs and wants may change. If you are going to be paying so much hard earned money for something you want to make sure you are spending wisely on a home you will be in for a while.
More for Buyers:
For more advice on buying and selling real estate in Washington state please browse our website. To find a network of experienced real estate agents across Washington look no further than Better Properties.