Buying a home is an exciting milestone, but knowing how much home you can afford is where the journey really begins. Before you start touring houses and scrolling through real estate listings, consider these six steps to understand what you should be looking for.
With a clear understanding of these factors, you can set a comfortable price range that fits your lifestyle today and your goals for the future so you can shop with confidence:
Start With A Monthly Budget
One of the easiest ways to estimate how much home you can afford is to look at your monthly budget, not just the purchase price of your home. Consider how much you can currently spend each month, how much you want to comfortably spend on housing and whether or not you’ll have room in your budget for things like travel, unexpected expenses or savings.
You don’t want to be stretched too thin by your home payment. Taking an honest look at your budget will help you set realistic expectations from the start.
Understand What You’ll Be Paying
Your mortgage payment consists of more than just the loan itself. You’ll also be paying property taxes, homeowners insurance and HOA dues if applicable. When estimating how much you’ll need to put aside each month, factor in all these pieces and not just the loan amount so that you aren’t caught off guard by any surprises later.
For more information on homeowners insurance, check out another one of our blog posts here.
Factor In Your Down Payment
Choose a down payment that works for your financial situation and long-term goals. A larger down payment can lower your monthly payment, whereas a smaller one could allow you to buy a home sooner. Conventional Loans enable you to get started with a down payment as low as 3% and FHA Loans offer more relaxed qualification requirements, with a down payment option as low as 3.5%.
Consider Your Existing Financial Commitments
Your current financial commitments will play a big role in judging how much home you can afford. Look over your expenses and consider the debts you currently have. Things like car payments, student loans, credit card balances, medical bills and other debts should factor into your decision making. Be honest with your financial outlook and make sure your homebuying goal fits alongside your other expenses.
Think Beyond The Purchase Price
There are other costs associated with owning a home that go beyond the mortgage payment. These include utilities, maintenance and repairs, home improvements and lawn care. Plan for these expenses, and make sure you budget for unexpected costs that may come up after you purchase your property. This is especially important if the home you want has aging features (such as an older HVAC) and you know repairs or replacements may be on the horizon.
Get Pre-Qualified Or Pre-Approved
One of the best ways to understand what you can afford is to speak with one of our Home Loan Experts. Getting pre-qualified or pre-approved (for more on the difference between the two, click here) gives you a clearer price range you should target and strengthens your offer. It can also help you identify potential options you might not have considered. This is a helpful step that turns your estimates into real numbers.
It’s crucial to be prepared for the homebuying journey ahead by considering your financial profile and finding the option that fits your needs. In doing so, you’ll have the clarity and confidence to move forward and find the right home for you.
Looking to start your journey home? The options and benefits available may surprise you!
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Various Loan Options Find the right home loan for your unique goals and financial situation. |
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Expert Guidance Our Home Loan Experts are here to help by sharing their knowledge and setting you up for a successful process from application to close, throughout the life of your loan, and well into the future as your trusted partners. |
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Pre-Approval Before you have found your dream home, get pre-approved for FREE. Once all information is submitted, we will provide your pre-approval details within the next business day. |
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Mortgage Checkups Monitor and update your home loan as your mortgage needs and goals change over time. |
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Get Extra Savings Save $750 on all your new home purchase loans with your AmeriPurchase+ Benefits.* |
We can help guide you through every step of the home financing process. To get started, just give us a call at 877.785.5422 or get your instant rate quote here.
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*As a member of the AmeriHome family, borrowers are part of the AmeriPurchase+ program and qualify for a $750 lender credit for all of your home purchases done with AmeriHome, for any property you own. Credits will be applied only if your loan closes with AmeriHome. This offer can not be combined with any other offers and is not applicable for FHA Streamline, or VA IRRRL Refinance transactions. Other restrictions may apply. Terms and conditions are subject to change. The AmeriPurchase+ program is subject to termination without notice.
