How much house can I afford?
The idea of taking on a mortgage can be daunting, especially for first-time homebuyers. Buying a home is a financial commitment that shouldn’t be taken lightly—though, with the right budgeting and planning, it shouldn’t be stressful either. As a realtor agent with Keller Williams, I look at one of the most common questions for those looking to buy a home: How much can I afford?
DISCLAIMER: I’m a top real estate agent, not a financial adviser. While the following is general advice based on years of experience in the realtor industry, any decisions about your unique financial situation should be made in consultation with your bank or adviser.
When determining how much house you can afford, you’ll want to consider your annual income compared to your monthly living expenses. How much do you spent on food, clothing, entertainment, etc? What about income taxes? A car payment? School loans? Credit card debt?
You’ll also want to add up the expenses associated with home ownership, such as property taxes, homeowners insurance, homeowners association dues (if you have one), and the cost of maintaining a home. Fortunately, in many communities in Greenville, SC, Simpsonville, SC and other Upstate areas, these costs can be relatively low.
How much cash are you planning to put towards a down payment? (Make sure to keep some in the bank for emergencies!) If you aren’t able to put down 20% of the purchase price, you’ll likely need to pay mortgage insurance (PMI) each month. It’s obviously also important to consider the interest rate you can get on a loan.
Fortunately, there are a myriad of financial tools available (including some free ones) to help you calculate how much you can afford in monthly mortgage payments. Here are just a few:
While these online resources are a good place to start, they shouldn’t replace a conversation with your bank or financial adviser. A certified lender can help you get pre-approved for a loan, which is a great first step toward home ownership. It means you’re ready to put in an offer when you find the perfect home.