Home affordability – how to know how much home you can buy?

April 25, 2018 by
Filed under: Uncategorized 

By HomeCareBuzz

First-time homebuyer? Upsizing? Buying a second or vacation home? Downsizing? No matter your home buying aspiration, the first question you’ll always need to ask yourself is, how can I buy the home I want? Using this home affordability checklist can help answer that question. When you take the time to find out how much home you can really afford you’ll find it’s easier to make the many subsequent decisions on the when and where to buy your dream home. Check off these steps first and you’ll be ready to take the big leap.

What’s your total annual income?

Your first step to check off on the home affordability list is to accurately determine what your annual income was for the previous full year. To do that you find the sum total of your gross income, before taxes or other deductions, and you add to that any potential future bonuses you might expect to receive and/or any other income sources you may have. If you are buying the house with a spouse or partner, for example as joints tenants, or with another person, perhaps as tenants in common, add their annual income as well to determine sum total annual income.

Why getting prequalified matters?

Why should you determine your total annual income? Because when you’re ready to shop for a home it’s best to get prequalified. Annual income affects how much home you can qualify for– a mortgage lender looks at your complete financial picture and qualifies you for a mortgage based on that picture. In addition to annual income, a lender will look at the savings you have and what debts you owe. You are prequalified or preapproved for a loan based on all of those numbers.

What’s your down payment?

In this step determine the total amount of money you can put down on a home purchase. Home affordability should not lead to home impoverishment, so don’t commit all of your funds to your down payment. You need to protect your financial health from unforeseen hits to your income during and after the home buying process. Lenders typically want a 20% down payment to buy a home, but if that’s a high hurdle where you are looking to buy, shop around. Many lenders have options and can work with you to find the right loan, depending on your credit score and other factors. more…

By Tara Walsh on February 9, 2018 / Home Buying, Home Services, Home Warranty, Mortgage

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