When buying a home, it’s important to understand the entire home buying process. One of the first questions you need to ask yourself is, “Can I afford a new home?” Whether you’re a first time buyer looking for the perfect starter home, or an experienced buyer looking for a larger home, you may be asking that same question. You may have looked online and used a mortgage calculator as a first step in answering this question. It’s a good idea to analyze what you spend monthly and calculate a detailed expense breakdown. You want to get a full month’s snapshot!
That’s a good start, but it’s also important to talk to the professionals – lenders and real estate agents who can help you to make sure that you are looking at homes that you can afford. Speak to a lender – or two – to get “pre-approved” for your home purchase. This is a very important step for every new buyer! It’s important to look at homes in the price range that you can afford. Nothing is worse than finding the “perfect” home, only to find out that it’s not in your range financially.
Lenders determine how much loan you can afford by using your debt-to-income ratio, which is the ratio of a borrower's total debt as a percentage of their total gross income. Basically, they look at what's left in your budget after your monthly bills are paid. Lenders want your total mortgage debt (called PITI — an acronym for Principal, Interest, Taxes, and Insurance) to be no more than 30 percent of your gross monthly income; 28 percent is standard.
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This can be confusing and overwhelming for buyers. That’s why it’s important to seek out the real estate experts to help you find the perfect home – one that you can afford! For more tips on buying a home, feel free to contact me at 412-841-5050.
