Before starting to look for that perfect home, take a close look at your finances. The reality is your dream home will remain a dream if you can’t afford it. Here’s how to determine how much house you can afford:
- How much do you earn? Add up your individual and household gross monthly income.
- How much can you afford to spend on mortgage payments? It’s best not to spend more than 25% of income on mortgage payments. Multiply your monthly household income by 25% to determine the maximum monthly mortgage payment you can afford.
- Use an online mortgage calculator to see how much home that will buy. Plug these numbers into a mortgage calculator, along with estimated private mortgage insurance cost, property taxes, homeowners association fees, etc.
- Don’t forget other expenses. Remember, homeownership comes with additional costs like utilities, new appliances, ongoing repairs, and maintenance. Estimate how much this will add to your monthly expenses.
- Consider down payment. The bigger your down payment, the lower your mortgage payments. Plus, if you can save a 20% down payment, you’ll avoid private mortgage insurance. But saving a larger down payment may delay your purchase and in the long run, might not be the best decision. There are loan programs available with as little as 3% down for first-time homebuyers.
- Remember closing costs. Like a down payment, closing costs are a significant one-time expense. They can amount to 4% of the purchase price, and include an appraisal, attorney, credit report, home inspection, etc. Use our Florida Mortgage Closing Cost Calculator to estimate your monthly mortgage payment, including taxes, insurance, and PMI.
Get started today! Talk to an experienced Ideal Lending mortgage loan officer and get pre-approved to find out exactly how much you can afford. Your mortgage loan pre-approval is a detailed, high-resolution, picture of your creditworthiness verified by a full review of your income and assets by an Ideal Lending Mortgage underwriter.
Buying a new home or refinancing your current loan? Our experienced team of loan originators are dedicated to making that a reality. At Ideal Lending, you will work one-on-one with a dedicated mortgage loan officer who can explain loan programs and offer great mortgage rates to meet your financial goals. Contact us today!