Congratulations on starting your home buying journey. It’s an exciting time to be looking for your dream home or starter home.
You probably have mood boards and dream boards filled with all the decore you want to add to your new space but there’s always a question that looms as we start looking for that perfect place to call home. How much house can you afford?
The first step in calculating how much house you can afford is determining the size of your down payment on the house. The required down payment amount will depend on various factors, including the terms your mortgage lender mandates,
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.
Now that you have decided on your down payment and mortgage, the next step in calculating how much house you can afford is to figure out your debt-to-income ratio (DTI). This number is significant because it shows lenders the percentage of your income allocated to debt repayment every month, including your mortgage payment.
In addition to your down payment, you will also need to pay closing costs. 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.