How much house can I afford? That is a question many home-buyers ask themselves when they are in the process of buying a new home. Purchasing a home is one of the most significant investments you will make in your lifetime.
You must take the time to define a budget and carefully evaluate your financial situation before you start looking for your new home.
The required down payment amount will depend on various factors, including the terms your mortgage lender mandates, the type of mortgage loan you get, and how much money you have saved up.
There are several types of mortgages, including 30-year fixed-rate loans, 15-year fixed-rate loans, and adjustable-rate mortgages, where the interest rate changes after every 3 to 5 years. Talk to your lender about all your options.
A debt-to-income ratio greater than 36% is considered high-risk for lenders and may make it difficult for you to get the best interest rate.
Closing costs are taxes and fees charged by the lender and other parties involved in the home purchase transaction, such as title companies, lawyers, and escrow agents. You may also have to pay appraisal fees and additional fees required by state law.
The last step in calculating how much house you can afford is considering other factors such as property taxes and homeowners insurance rates in your area. These two costs can vary drastically from one city to another, so it’s essential to do your research before settling on a final number.