How much can you AFFORD to Finance?
One of the hardest calls to make when it comes to buying a home is how much you want to spend. The larger the mortgage you take out, the bigger the payments will be. Of course, there is more to the cost than simply the amount of the mortgage, as interest, taxes and insurance also play a role in your monthly payment. Did you know that “what you can afford” is determined by your monthly payment – and not the “price” of the house? So, how much exactly can you afford to finance? Consider these important factors.
How Is Your Credit?
If you have great credit you are likely to qualify for the lowest interest rates. This means that you will be able to take out a larger loan, since the same monthly payment will get you more. People with credit problems will usually pay higher rates. This means that the amount you can afford to finance is lower.
Look at Other Expenses
Look at all your monthly payments and debts that need to be paid off. Try to be realistic about what you can really afford to pay. While a mortgage company may qualify you for a larger loan (payment), that doesn’t mean you can afford it. Take into consideration your lifestyle and the extra things on which you like to spend money. Are you willing to give them up to pay a bigger mortgage? Some of your monthly bills are always the same and some change monthly. You need to have a realistic idea of what you spend each month on average to be able to determine what you can afford to pay monthly toward your mortgage.
Don’t Forget Property Taxes, Insurance, and Possibly Homeowners Association Dues
When calculating a monthly payment, don’t forget to add in your homeowner’s insurance and your property taxes. Take 1/12th of your annual cost and add it to your monthly payment. Once these are added in, you might want to consider financing a smaller amount to get the payment manageable. Once these two are added in, it can push your payment above your comfort level. Your Real Estate Shoppe Agent will go over things like Taxes, Insurance, and Association Fees, as well as refer you to reputable insurance agents to shop for insurance policies. You will also be paying closing costs to purchase the home and obtain a loan. It’s important to remember this when you consider how much you might need out of pocket to put toward a down payment.
Interested in getting more information on how to get approved? We recommend working with a Mortgage Lender you trust and who provides you with an exceptional customer service experience. There is nothing more stressful than waiting on a general customer service line when needing answers to questions about a loan – that’s why we prefer to work with local, boutique style mortgage professionals.
Need help narrowing down the options? Your Real Estate Shoppe Agent can give you a list of local, professional and reputable Loan Originators to get the ball rolling. Specifically, we love working with Scott Lushing & Todd Hudak over at Commerce Home Mortgage.
Let’s get started – give us a call or shoot us an email today! We’re happy to get you moving in the right direction.