14 Jun How Much House Can I Afford?
One of the biggest mistakes that a home buyer can make is purchasing a house that is far too big for their current lifestyle. Being realistic with your budget and goals is crucial to long-term happiness. Success as a home buyer involves finding your “sweet spot” and picking something that is the right size (and, as a result, the right price) to fit in with your current financial status. Luckily, we offer a range of communities to fit most home buyers’ budgets. Thanks to our extensive experience in the industry, we also have a few suggestions for what to keep in mind while shopping for your perfect home.
Start With a Payment
Many people approach home buying from the wrong angle. They may try to find a house they love first, then try to figure out how to afford the monthly payments. This can cause undue stress which could easily be avoided by understanding your limitations up front. You should always calculate what your ideal payment is FIRST, then let that number serve as the foundation for every decision you make.
Evaluate your current financial situation and determine how many mandatory expenses you have each month (things like food, utilities, car payments, etc.). Also consider discretionary spending, and be honest with yourself about your spending habits. Compare these figures to how much money your household makes to figure out what is left. Based on this information, determine a comfortable monthly mortgage payment range. You can use this calculator to estimate your monthly mortgage payment, including taxes and insurance, once you know the range you’re looking for.
Understand How the Mortgage Approval Process Works
Different lenders will have different rules that they follow when determining whether or not you get approved for a mortgage. However, as a rule of thumb, they typically allow a maximum debt-to-income ratio of somewhere between 41 and 43 percent. Need to calculate your debt-to-income ratio? Check out this handy DTI calculator. You’ll need to know the minimum monthly payment on your credit cards, car payments, loan payments, or any other debt owed in order to properly calculate this figure. The calculator will compare your debt to your gross monthly income to define the debt-to-income ratio that will likely be seen by your chosen lender. The more you know, the more confident you will be when you apply for your mortgage.
Know How to Lower Your Monthly Payment
Once approved, you can still take steps to make your mortgage payment more comfortable for you. There’s usually some level of compromise required. For example, longer terms yield lower monthly payments, but you end up paying more interest over time. A qualified lender can review your situation and help you make the right decision.
Get Started Today
At Sunrise, we have an elite group of preferred lenders to help you finance your new home. Our lenders are committed to helping you own the perfect home for your family and your budget, and they make the process of securing a mortgage simple. By using a lender with the latest in financial tools, you can rest assured that your financial choices have been informed and sound.