How Much You can afford on a Home Purchase

     How much can I afford for a house? Have you ever asked yourself this question? If you did, and still looking for an answer, it can be answered here.

     The amount you can afford involves two things: How much you can make for a down payment, and how much you can borrow from the mortgage lender. Experienced homebuyers are aware that one of the very first steps in a home purchase is to take a hard and objective study of the finances. Finding out the amount you can afford to buy a home affects most of the purchasing aspects.

Here are some things to consider in how much you can afford buying a home.

1.  Determine your net income. You start by deducting the taxes, retirement contributions, social security deductions and anything else taken from your pay. This could also include credit card payments and other loans that you have. After doing this, deduct the monthly expenses and the amount left is the maximum you can afford to buy a home.

2. Find out how much cash you have for paying a down payment fee. Your down payment fee will affect the types of loans you qualify. If you have a fair sum, it is much better to make a bigger down payment to lessen the amount of interest in your home mortgage loan.

3. Determine if you have the willingness to write out a check for an earnest money. This means a deposit you have to make in cash to the seller to secure your offer to buy the property. The earnest money amount is usually forfeited if ever you decide to withdraw your offer for a property.

4. Consider how much cash you can afford for closing costs. The costs of closing are associated with closing the deal.  These costs are split between the seller and the buyer.

5. Know the maximum amount of monthly mortgage payments you can afford. Lenders normally use the 28/36 rule to determine the maximum mortgage payment you can afford.

6. Refrain from relying too much on the lender telling you how much you can and cannot afford. Usually, they will offer you a loan and make as much money as they can get. There may be qualifications to get a loan, but most lenders will try to lend you more than your comfort zone.

7. If you are looking for the best way to buy a home, it is the 100 percent down plan! It may sound weird, but try to think how much comforting it is if you do not borrow to buy a home. However, if it is not possible for you to wait that long, try making a big down payment, or at least twenty-percent of the price. Choose a 15-year or less fixed mortgage rate.

     There is no magic dollar amount regarding your search for the “home of your dreams”. The house you can afford is unique as you. It relies on many factors such as the location, price, your preferences and your home-buying plan.

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