Calculating How Much Home You Can Afford
Calculating how much house you can reasonably afford is an important step in the process of buying your new home. No one wants to buy the house of their dreams only to find out they are in over their heads financially. So how much can you afford? Well that depends on a few things.
The first of which is your gross household income. This is how much income you bring in every year or month before all the taxes and fees are taken out. You should include your income as well as a spouse if you have one or anyone who will be sharing the burden of the mortgage with you.
The second big factor is your savings. How much do you have saved up to put as a down payment on the house. Some lenders don’t require any money down, but every dollar payed up front lowers your monthly payment. Some mortgages require twenty percent of the purchase price down in order to not carry mortgage insurance on the loan.
The third main factor is the mortgage interest rate. This is the amount of interest the lender will charge you annually on the loan. The lower the interest rate you can get, the lower your monthly payment will be. Even a few tenths of a percent can make a huge difference on your loan, so be sure and shop around for the best mortgage interest rates available.