Buying a home for the first time can be pretty daunting, and you might not know where to start. The first question you’re probably asked when talking to a real estate professional is “What is your price range?” Before you start house hunting, begin with your budget.
There are two main factors to consider when determining your home buying budget: down payment and monthly payment. Your down payment is the money you save to put towards your home purchase up front. The more you pay down, the lower your loan amount is. Depending on your loan program, you may be required to pay a certain percentage of the home’s value in your down payment, but if you can’t, programs like Private Mortgage Insurance could make it possible for you to purchase a home with a low down payment.
When determining your monthly payment, a good rule of thumb is that your monthly cost should be no more than 28% of your monthly pre-tax income. Income is not the only thing to consider, though. Your other loan payments, such as credit cards, cars, and student loans, should not exceed 36% of your gross monthly income. While it is possible to qualify for a home loan at higher percentages, and some experts might say differently, it is important to take a look at your entire financial picture and not overspend. Bear in mind that there are other costs associated with buying a home. Homeowners association fees, property taxes, interest, and mortgage insurance are costs that you should consider. It’s also important to keep expenses like utilities, general maintenance, upkeep like lawn mowing, along with major and minor repairs should be a consideration. These are often overlooked!
If this sounds overwhelming, know that you are not on your own! I am here to help you plan, get qualified, and move you into the home of your dreams- and your budget. Give me a call or apply today to discuss your options.