With interest rates at an all time low and housing prices stagnating, now is a great time to buy for the right person. Using an emortgage calculator to figure out how much house you can afford is a great start. But first you need to determine if you have what it takes to own a home. As someone who is on a mission to own a house within the next few years, I’ve done some research and realize if a person has their financial house in order (oh the pun, the pun) they’re off to a great start:
- A very good or excellent credit score; the higher the score, the lower the interest rate and the more likely the approval rate.
- Low to zero consumer debt; very little or no debt means less money is being siphoned out each month so more can be applied to a mortgage.
- A 20% down payment; a larger down payment means a smaller loan.
Of course once a person determines they have what it takes to purchase a house, it’s time to figure out what they can afford. A few ways to calculate how much house you can afford are:
- Use a mortgage calculator; many calculators can help you determine how much house you can afford. Some even take into consideration your income, how much debt you currently have and the amount of your down payment.
- Use an old standard, the 3/30/30 rule; this is an old standard – you should buy a house no more than 3 times your annual income, put 30% down (best case scenario) and pay no more than 30% of your monthly income on a mortgage payment.
Don’t be pushed into buying something outside of your comfort level. There are so many websites today that will assist you in finding the right home at the right price, don’t be impatient and splurge on too much of a house. Before meeting with a realtor, check out neighborhoods you’d like to live in online and determine what homes are selling for in those areas, you’ll have a better idea of prices in that neighborhood. If you can print out a list of homes within your price range, you’ll have a starting point you can show a realtor or broker. I’d even go as far as saying don’t go into homes you know you can’t afford; stay away! If you know $425,000 is too high but your realtor really “wanted” you to see it, don’t even bother walking in the door! Be firm and stick within your budget. Buying a home that is easily affordable will give you the extra cash to make it the home you really want.
Are you working on purchasing a home? Did you buy a home within your price range?
This post was provided by Emortgage Calculator.