How Much House Can You Afford? Learning how to differentiate your dream house from the one you can actually afford isn’t always the easiest task. In fact, understanding how much you can afford on a new house in general is somewhat difficult. Still, it’s a necessary skill to gain when house hunting– especially when attempting to avoid that overwhelming sense of disappointment. You know, the one where you get your hopes up, start daydreaming and then learn it’s not even remotely possible. Do your homework before you start looking at listings. Sit down with your family and discuss what everyone is looking for and then begin calculating what kind of home is in your budget that would suit everyone’s needs. Now is the time to buy, and luckily there is more you can afford than ten years ago. Let’s first take a look at calculating how much house you can really afford before exploring other parts of the home-buying-on-a-budget discussion. How Much House Can You Afford? So, how much house can you actually afford? To calculate how much you have in your homebuying budget, you must consider the following staples of your financial life. Your Gross Annual Income. Your salary or combined salaries are obviously a huge part of this endeavor. If you’re looking at a combined income of $50,000 then you most likely won’t be able to afford a house much more above $150,000. There are several other factors that come into play, of course, but I think this is a good marker point. The Amount You Have Saved for a Down Payment. How much can you pay off of the home’s total right off the bat? This will also play into the kind of loan you’ll be able to take out for your home purchase. Most fixed-rate mortgage loans have different down payment % requirements, but with a high-enough FICO score you can get a loan with a minimum down payment of 5% of the house’s price tag. For a $100k house this means you have to have $5,000 ready for the down payment. The more, the better however. There are also loans that require 10% and 15% down payments which generally involve private mortgage insurances. Your State of Debt. Your debt also is considered when taking out a loan. Let’s just say that the more monthly debt you’re paying off, the less you can afford for a house. How Much House Can You Afford? All in all you should meet with your bank and/or a financial advisor to consult them about what you can realistically afford. There are plenty online calculators that can help you get a good idea of what you can afford as well. Home prices and mortgage rates are lower than ever. Three days ago 30-year fixed mortgage rate averages hit an all time low of 3.94%. Remember that just because you can’t buy your dream house right off the bat, doesn’t mean that you’ll never be able to afford it. Many families start their lives together in “starter” homes and work their way up. Buying a home in foreclosure is also something to consider in these days– especially if you and your family are good at fixing things up. It may be a lot of work, but you can buy a house in foreclosure for a dirt cheap price, live in it and fix it up before selling it down the road for significantly more. How Much House Can You Afford? Related Posts B Auto Loan Dealer Tricks 2010 Lowest Auto Insurance Rates by Model Generic or Branded?
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How Much House Can You Afford?
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