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    Is Now The Time To Buy?

    Can You Afford to Buy a House?

    Who doesn’t want the American Dream of owning a home? Homeownership is the quintessential aspiration of immigrants and natives alike. However, it’s essential to understand all the costs involved in buying and owning a home.

    Information for Buyers

    Many potential buyers sometimes forget to factor in the down payment, homeowners insurance, and the possibility of depreciation, as well as the costs associated with closing the transaction, moving, purchasing major appliances, landscape, and pool maintenance. And not to mention, furnishings and design accessories once you move in!

    For a general idea of your buying power, multiply your gross annual income by 2.5. For example, if you had a household income of $50,000, you may qualify for a $125,000 home. The actual number may be more or less, depending on your situation, debts, and credit history.

    Housing Expense Ratio

    As a general guide, your monthly mortgage payment should be less than or equal to 30% of your income; some experts say a quarter of your gross monthly income. The percentage can change depending on the type of mortgage you choose. However, there are mortgage products available that focus solely on the debt-to-income ratio. Your lender can provide a variety of options on the types of mortgage products.

    Debt-to-Income

    Your buying power can be affected by factors such as income, debt, and credit history. Your debt, such as credit card bills and car loans, and other expenses such as housing, alimony, and child support, should not be more than about 30-40% of your gross income.

    How Much Money Do I Need to Buy a Home?

    You’ll need money for:

    1.) A down payment

    2.) Closing costs

    3.) Other housing-related costs – mortgage payments, maintenance and repair costs

    Your Down Payment

    The down payment is a percentage of the value of the property. What percentage that is will be determined by the type of mortgage you select. Down payments usually range from 3 to 20% of the property value.

    You may be required to have Private Mortgage Insurance (PMI or MI) if your down payment is less than 20%.

    Closing Costs

    Closing costs include points, taxes, title insurance, financing costs, and items that must be prepaid, escrowed, and other settlement costs. These costs generally range between 2-7% of the property value. You will receive an estimate of these costs from your lender after you apply for a mortgage. While it may seem that it can take a lot to buy your home, you may be much closer than you think!

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