How Much Can I Afford to Spend on a New Home?

This is a very important question. Many first time home buyers forget that there are other costs associated with owning a home outside of your mortgage payment. Sometimes, what you can be approved for is more then you're willing to add to your monthly budget.


How Much Do I Need For My Down Payment?

If you have ever asked your parents or grandparents about buying a home, they most likely told you that you should put a minimum 20% down payment. It's good advice and a great way to avoid paying costly private mortgage insurance, but it's no longer a requirement. An a FHA loan requires as low as a 3.5% down payment or if you qualify for a VA loan your down payment could be as low as $0.


Other Costs Associated With Home Ownership

While you are trying to decide on a budget for your new home, it's very important to factor in the other costs that do not appear in your monthly mortgage payment. Some things that you will want to consider are:

  • Monthly maintenance to the home

  • Surprise repairs that need to be made

  • Monthly utilities like electricity, water, sewer, heating and cooling, and trash pick-up

  • Any new furniture for the home

  • New appliances like a refrigerator, stove, or washer and dryer

You will also need to have money put aside for closing costs, down payment, and other fees. It is becoming more common for a seller to contribute money towards your closing costs. Make sure to ask your Real Estate Agent about this when you write an offer on a home.


Getting a Pre-Approval

Obtaining a pre-approval is the best way to find out the price range of homes you should be searching through. This prevents you from wasting your time by looking at homes that fall outside of your price range. Also once you have found the home you want to make an offer on you can include your pre-approval letter with your offer and the sellers will know they are dealing with a buyer that means business.

Pre-Approvals are not a 100% guarantee that you can get the financing needed for a particular home. There are a number of things that can interfere like an unsatisfactory title or low appraisal.


Buyers With Less Than Perfect Credit

If you have less than perfect credit, it's still possible to get approved for a home loan. You should be aware that you may have to pay higher interest rate to offset the risk taken by the lender. Another option is to try and improve your credit before applying for a mortgage.


Conclusion

No one will ever say that owning a home is an easy venture. There are many ways to prepare yourself and make sure that you are not getting in over your head. If you have any questions feel free to contact me.



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