Blog

How Much House Can I Afford?

How Much House Can I Afford?

August 8th, 2018 | Purchasing a Home, Preapproval, Pre-qualification

When you are ready to buy a home, whether for the first time or the tenth, it is always important to know how much you can afford to spend. This will help you narrow your home search and ensure you do not get in over your head financially. There are several factors to consider when determining how much house you can afford.

Debt Ratios

Mortgage lenders will evaluate your debts relative to your income. The standard rule of thumb for debt-to-income ratios is 28/36. The first number means lenders prefer that your total housing debt- including your new mortgage, taxes, HOA fees, private mortgage insurance, etc. – is less than 28% of your total income. The second number refers to your total debt – mortgage, car loans, student loans, credit cards, etc. – which lenders prefer to be less than 36% of your income. Of course these ratios will vary slightly by lender, but the lower your ratios, the better your chances of finding funding and getting good interest rates.

Credit

How much you can afford for a house will also be determined by your credit history and FICO score. These factors will influence what type of mortgage you can qualify for and how low the interest rate will be. If your credit score is less-than-perfect, your mortgage interest rate will be higher, making your monthly payment higher and reducing how much you can actually spend on a house. If your credit profile is not as clean as you would like it to be right now, you can take steps to improve your FICO score before applying for a mortgage.

Down Payment

Almost all home loans require a down payment, even if it is just 3% of the purchase price. (There may be some exceptions in FHA and VA loans.) The more you have to contribute as a down payment, the more attractive you will be to sellers and the more attractive your loan options will be. A 20% down payment is ideal because with any less than that you will have to pay private mortgage insurance which pushes up your monthly payment and cuts down your home price budget.

Beyond coming up with these numbers, you should consider your lifestyle when it comes to how much you can afford. Buying a home can come with many hidden costs - repairing and replacing various parts and appliances, HOA dues, higher utilities, yard work, renovation – and those can eat into your budget for other things like entertainment or savings. It is important to set a house budget that will give you enough cushion to still be able to pay for not only the essentials of food and transportation, but also for your retirement goals, saving for kids’ college and vacation plans.

With some careful calculations on your own and possibly with the help of online tools, you can figure out how much home you can truly afford without stretching your resources too thin. When you buy a house within that budgeted price range, homeownership can be just as enjoyable as you have dreamed it would.

Do you want to find out how much house you can afford? If so, contact Kings Mortgage Services, Inc. at 559-713-1200 today and we can give you the answer over the phone.

Comments



Leave a Comment

Contact Us


Not readable? Change text.


Kings Mortgage Services Inc.

Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act - NMLS 264441

Thank you for your interest in our company. Please select from any of the following ways to contact us.

 

HANFORD
1507 N. 11th Ave.
Hanford, CA 93230
Phone: 559-585-7400
Fax: 559-585-7404
VISALIA
3700 W Mineral King
Visalia CA 93291
Phone: 559-713-1064
Fax: 559-713-1065
SELMA
2020 High St., Suite A
Selma, CA, 93662
Phone: 559-318-9931
Fax: 559-318-9934
FRESNO
685 W. Alluvial #105 Fresno, CA 93711
Phone: 559-432-5100
Fax: 559-432-2796
ARROYO GRANDE
136 W. Branch St.
Arroyo Grande, CA 93420
Phone: 805-904-6991
Fax: 805-904-6999
CORPORATE OFFICE
4244 W. Mineral King Avenue
Visalia, California 93291
Phone: 559-713-1200
Fax: 559-713-1275