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.
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.
The most popular type of mortgage is the conventional 30-year fixed-rate mortgage because it allows borrowers to have low monthly payments while still paying off their homes in a reasonable amount of time.
3. What Numbers and Ratios are Important to Mortgage Lenders?
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.
4. What Are Closing Costs and How Much Money Do I Need for Them?
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.
5. What Is the Impact of Taxes and Insurance on How Much House I Can Afford?
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.