Owning a home may be your dream, but in order for the purchase to be the happy and satisfying experience it was meant to be, you need to ensure that you are financially prepared for the responsibilities that come with it. It can be discouraging to find that your salary won't stretch as far as the home you want to own. However, sacrificing a huge part of your income just to pay the mortgage can very quickly make homeownership a burden rather than a point of pride.
Determining how much house you can reasonably afford, and the size of your mortgage, requires careful evaluating:
- Savings - how much have you set aside to cover a down payment on your home, as well as your closing costs.
- Affordability - how much can you safely borrow, and still meet all your financial obligations?
What is your debt-to-income ratio?
A general rule is your total monthly expenses (including the new home) should never be above 45% of your gross (pretax) income. For a first time home homebuyer, I typically recommend for this ratio to be 35% or less. A homebuyer should typically be able to afford a home that is 3 to 3.5 times your annual salary (or income).
And please remember that not all banks are created equal. Some banks can be great for your day to day banking, but have a reputation as terrible mortgage lenders. Therefore, please ask either myself or your friends and family for mortgage lender recommendations. A mortgage lender will advise you and let you know your qualification, how much you can afford, what tie monthly payments will be and was you should expect throughout the home buying process.
I'd love to be a real estate resource for you so if you have any comments or questions, please feel free to fill out the form below.