Skip to content

How Much House Can I Afford?

A house is likely to be the biggest purchase you will make in your life, and you may spend decades paying for it. Getting a mortgage to purchase a home can be a wise financial decision since you’re building equity and getting nice tax deductions. But buying a home that’s too expensive can leave you strapped and unable to prepare for other financial goals, like saving for retirement, kids’ college educations, or vacations.

Determining how much you can afford is the first step to responsible home buying. Consider these three questions to help you arrive at your magic number.

1. How much have you saved for a down payment?

Most mortgage lenders require you to pay a percentage of the purchase price as a down payment. That percentage can range from 3 to 20 percent. In many cases, if you put down less than 20 percent, you’ll likely be required to pay for private mortgage insurance, which can cost .15 to .25 percent of the loan amount.

If you plan to sell one home and buy another, you may be able to apply any equity in your current home toward a down payment on the new home. If you’re a first-time homebuyer, taking time to aggressively save a down payment will pay off — a larger down payment will let you buy more house or make smaller monthly payments.

2. What monthly payment can you afford?

Most lenders recommend that borrowers spend no more than 28 percent of their monthly income on a mortgage payment. Keep in mind that just because a lender is willing to loan you a certain amount doesn’t mean that you should borrow to the limit. You may not want to spend almost one-third of your monthly income on your mortgage. Write out a budget and keep in mind that you’ll need funds for home repairs, maintenance, and updates, as well as whatever else you want to spend your money on — vacations, savings, gifts, food, gas, etc. For help determining the right number for you, use an online mortgage affordability calculator.

3. What is your credit history?

Your credit score will determine whether you qualify for a mortgage and what terms you’ll get if you do. Different lenders have different credit score requirements, but most expect borrowers to have credit scores in the 500s. For instance, FHA requires applicants to have a credit score of 580 or better to obtain maximum financing on typical new-home purchases, and offers some products with lesser financing for those with credit scores between 500 and 579.

If your credit score is too low to qualify for the mortgage rates you want, be patient. Consistently working to improve your score by checking for and resolving errors and methodically paying off debt can improve your score over time.

Once you’ve determined how much you can spend on a new home while still meeting other financial goals and obligations and avoiding the stress of excessive debt, you’re ready to start shopping.

Just remember to stay within your budget. Avoid the temptation to look at houses that cost more than you’ve committed to spend and you’ll be more satisfied with your home — and your whole financial life — in the long run. Our mortgage team has customized solutions for your situation and are always willing to guide you through the process. Have your questions answered or get pre-approved today!

Share the knowledge
  • 32
    Shares

20 Comments

  1. Write more, thats all I have to say. Literally, it seems as
    though you relied on the video to make your point.

    You clearly know what youre talking about, why throw away your intelligence on just posting videos to your blog when you could be giving us something informative to read?

  2. When I initially commented I clicked the “Notify me when new comments are added” checkbox and now
    each time a comment is added I get several emails with the same comment.
    Is there any way you can remove me from that service? Appreciate it!

  3. Its such as you learn my mind! You seem to understand a lot approximately this, like you wrote the guide in it or something. I believe that you just could do with some percent to drive the message home a bit, but other than that, this is fantastic blog. An excellent read. I will definitely be back.|

  4. Hi there, I check your blogs daily. Your humoristic style is witty, keep it up!|

  5. Hi there! I could have sworn I’ve been to this web site before but after browsing through many of the articles I realized it’s new to me. Anyways, I’m certainly pleased I came across it and I’ll be bookmarking it and checking back regularly!|

  6. I delight in, lead to I found just what I used to be having a look for. You’ve ended my four day long hunt! God Bless you man. Have a nice day. Bye|

  7. I’ve been surfing on-line more than three hours as of late, yet I never found any interesting article like yours. It is beautiful price sufficient for me. In my view, if all site owners and bloggers made just right content material as you probably did, the net shall be a lot more useful than ever before.|

  8. My coder is trying to persuade me to move to .net from PHP. I have always disliked the idea because of the costs. But he’s tryiong none the less. I’ve been using WordPress on numerous websites for about a year and am worried about switching to another platform. I have heard very good things about blogengine.net. Is there a way I can transfer all my wordpress content into it? Any kind of help would be greatly appreciated!|

  9. It’s really a great and helpful piece of info.
    I’m satisfied that you shared this useful info with us.
    Please keep us up to date like this. Thanks for sharing.

  10. I used to be recommended this web site by way of
    my cousin. I’m not sure whether or not this submit is written by means of him as
    nobody else know such unique approximately my difficulty.
    You are amazing! Thanks!

  11. Hello there! Would you mind if I share your blog with
    my twitter group? There’s a lot of people that I think
    would really appreciate your content. Please let me
    know. Many thanks

  12. Amazing things here. I am very happy to see your post.
    Thank you so much and I’m having a look forward to touch you.

    Will you please drop me a e-mail?

  13. Today, I went to the beach with my children. I found
    a sea shell and gave it to my 4 year old daughter
    and said “You can hear the ocean if you put this to your ear.” She put
    the shell to her ear and screamed. There was a hermit crab
    inside and it pinched her ear. She never wants to go back!
    LoL I know this is entirely off topic but I had to tell
    someone!

  14. Today, I went to the beachfront with my children. I found a sea shell and gave it to my 4 year old daughter and said “You can hear the ocean if you put this to your ear.” She placed the shell to her ear and screamed. There was a hermit crab inside and it pinched her ear. She never wants to go back! LoL I know this is completely off topic but I had to tell someone!|

  15. I absolutely love your blog and find most of your post’s to be exactly I’m looking for.
    Would you offer guest writers to write content available for you?
    I wouldn’t mind producing a post or elaborating on many of the subjects
    you write concerning here. Again, awesome web site!

  16. Since the admin of this website is working, no doubt very quickly it will be
    well-known, due to its quality contents.

  17. Wonderful work! That is the kind of info that should be shared around the internet. Disgrace on the search engines for now not positioning this publish upper! Come on over and discuss with my website . Thanks =)|

  18. It’s very trouble-free to find out any matter on web as compared to books, as I found this paragraph at this website.

  19. Thank you, I have recently been searching for information about
    this topic for a long time and yours is the greatest I have
    came upon till now. However, what about the conclusion?
    Are you certain concerning the supply?

Leave a Reply

Your email address will not be published. Required fields are marked *