How Much Home Can You Afford?
Buying a home can be an overwhelming process, especially for first-time buyers. The real estate market is in a steady state of flux, and depending on your area, your wish list, and your resources, the options can seem endless. When it comes to homeownership, however, everything aside from your finances will ultimately take a backseat, so having a firm idea of your spending power will go a long way towards getting you the right house. So long as you go into the process aware of what factors contribute toward your mortgage, you can focus on ensuring your house is the home you’ve been dreaming of!
What to Watch Out For
Nobody likes bad news, so we’ll get it out of the way first. Buying a home is a serious business, and buying more home than you can afford can have some serious consequences. Your initial nest egg and housing loans may allow you to overpay on your mortgage for a time, but homeowners who spend beyond their means often find it catches up with them. While banks often offer grace periods in the short term, a long-term pattern of being unable to make payments will crater your credit score and can eventually lead to the bank foreclosing on your house.
More often than not, these problems are simply caused by a lack of knowledge, so getting all the facts on home affordability in advance and having expert help in your corner will go a long way towards helping you avoid the pitfalls of overextending your wallet. So long as you start with a good plan and a good lender, you should be able to avoid mortgage trouble!
Where Does All the Money Go?
So it’s best to be prepared and find a home that fits your needs, but how much home can you afford exactly? A lot of factors will go into determining house affordability, whether you are building a house or buying an already existing one. Are you looking for a house that fits your current needs or one that will continue to be comfortable years down the line? Are you looking for style and substance or simplicity? How you answer all these questions and more will determine your down payment, but owning a home includes costs beyond purchasing the building itself.
Homeowners face a lot of ongoing costs, including insurance, property tax, and sometimes private mortgage insurance (PMI). These costs will vary depending on your location, the kind of financing you procure, the size and value of your house, and a number of other factors. All in all, these are just a standard part of the homeowning package, but they can quickly add up, and it is important to include them in your budgeting considerations.
How to Plan
All the costs associated with home ownership can be intimidating for first-time buyers, but they shouldn’t take away from the excitement of buying a home! You’ve dreamed of and saved for this moment, and it will still give you plenty to cheer about so long as your eyes don’t get bigger than your wallet. Working with a lending expert will be essential in hammering out the details of your mortgage goals, but there are some general budgeting rules you can keep in mind to give you an idea of what to expect.
The age-old wisdom is to follow the 28/36% percent rule, which advises you not to spend more than 28% of your monthly income on housing and no more than 36% on total debt, which will include your housing costs, along with other debts, like car payments. Simply take your monthly income, multiply it by 28, then divide by 100 to get a general idea of how much your monthly housing costs should come out to. Your mortgage rates will vary depending on the length of your loan, so having an idea of how far your income can stretch is vital before signing on the dotted line.
Hero Loan Is Here to Help
When it comes to style, size, location, and more, homeowners are all looking for different things, and everyone has their own idea of how much house makes a dream home. The one thing that won’t vary when it comes to veterans looking to branch out into homeownership is Hero Loan’s dedication to meeting your needs in a quick, convenient fashion.
Collaborating with our experts will ensure securing the right lender who understands your individual needs moving forward. Unlike many lenders, who default towards a blanket approach, we seek to get to know you and match you with the loan rate that is best for you. To find out more, check out our mortgage calculator, and then contact us to talk to a loan expert and start your five-minute loan approval today!