Purchasing a home can be thrilling as well as scary. You are investing a huge amount of cash for a house you’ll reside hopefully for many years. It’s only normal to have doubts and questions along the way.
“How much house can I afford?” is a question I’m asked frequently by clients looking to purchase a new home. It’s probably the most expensive thing you’ll ever buy, and there are lots of expenses you might not even know about. Everybody’s total costs are different, but it’s almost guaranteed you won’t have that much money saved up. Hopefully you have enough for a nice down payment. Here’s the reality in detail.
Cost of buying a home: One time costs (down payment, legal fees, inspection fees, taxes). Monthly costs (mortgage, utilities, maintenance, insurance, property taxes).
The mortgage you can afford will depend on many factors, including, annual income, down payment, your target monthly payment, and other financial obligations, etc.
Your annual income is the before taxes combined income for you and your co-borrower, including salary, commissions, rental income, investment income, alimony, child support, etc.
Down payment is a payment made in cash. Because houses are extremely expensive assets, home buyers typically pay down payments that equal 5-25 percent of the total value of a home. The remaining 75-95 percent of the price will be covered by a bank or other financial institutions through a mortgage loan.
Other financial obligations include your and your co-borrower’s monthly debts: credit card payments, car payments, student loans, alimony/child support payments, mortgage or rent payments on your current house, other personal loans with periodic payments, etc.
Money makes the world go round, and a mortgage gives you the power to buy a home. There are hundreds of banks, credit unions and other lenders out there who would love your monthly mortgage payments. So talk to everybody. Ask people you know. REALTORS® are very knowledgeable about Mortgages and have lots of good advice.
Mortgage brokers are another great resource. They find low rates for a living, and they usually don’t get paid unless you sign a mortgage through them, so they’re highly motivated to get you the best deal.
Your best mortgage might be the seller’s mortgage. You can sometimes assume the seller’s mortgage. This is a great idea if the seller is locked into a lower interest rate than you can get right now. Your REALTOR® can help you.
You don’t want to fall in love with a house outside your price range, it opens you up to disappointment. When you think you are ready for the next move meet with a trusted lender to get pre-approved for a home loan, based on verification of your credit and income. Being pre-approved makes you only much more attractive to sellers.
MARTA DURE is a long time South Dade resident, graduated from Florida International University with a major in Accounting. With a passion for business and an interest in Real Estate, she joined EWM Realty International, an affiliate of Berkshire Hathaway in 2014. Because of her Accounting background, she is detail-oriented, efficient in pricing, writing contracts, and negotiating offers.
Contact Marta for more information at 305-213-4430 or by email at Mardure@hotmail.com.