Calculate How Much Home You Can Afford
If you’re looking to purchase a home this year, chances are you’re looking at your finances and wondering where to start when deciding on what you can afford. Here are some tips for calculating how much home you can really afford.
Income – One of the most important factors in deciding what you can realistically afford starts with home much money you are bringing in. This is where you will start with your calculations. Figure out how much income you are actually bringing home on a monthly basis.
Utilities – Next, you will subtract monthly payments such as electricity, water, and garbage.
Monthly Bills – Other subtractions you will need to make are for miscellaneous monthly payments such as cell phone, car, student loans, groceries, credit cards, gym memberships, and any other expenses you pay for on a monthly basis.
Wiggle Room – Perhaps the key to this entire equation is the wiggle room you provide yourself. Utilities and other payments could potential go up once you own a home, especially if you are looking to invest in a larger property. Adding these additional costs into the equation (even estimates) will help give you a more realistic budget.
Factor In – At this time, you need to factor in new expenses such as insurance, property taxes, slightly higher utilities, mortgage loan closing costs, and maintenance costs. Not all of these will be repeating payments but it is something that needs to be taken into consideration when finalizing what you can afford in a home. Closing costs can be thousands of dollars in addition to your down payment. Property taxes are something only homeowners deal with which can be a shock for a first time homebuyer. Buying a bigger home generally means more expensive utility bills and becoming a homeowner means all maintenance is now your responsibility. Being prepared for these additional costs will allow you to determine how much home you can really afford.
Once you calculate how much home you can invest in, talk to a qualified mortgage professional for more information and to ensure you have all of the details. This is an incredibly important step in purchasing a home and the mortgage loan process.