September 6th, 2023 4:52 PM by Christopher Terry
At E Z Home Search Real Estate, we understand that as a first-time home buyer, you may have a lot of questions about the home buying process. Let us help you navigate this exciting journey.
And one of the most crucial initial steps is determining how much you can afford for your new home.
When determining how much you can afford for a home, it's essential to consider your financial situation.
Start by reviewing your monthly income and expenses. A general rule of thumb is that your monthly housing costs (including mortgage, property taxes, and insurance) should be no more than 28% to 31% of your monthly gross income. However, if you meet credit score and reserve requirements, there are programs that allow to 45%.
Next, factor in your down payment. Traditional advice suggests putting down 20% of the home's purchase price, however saving as much as 20% can delay your homeownership. And as you are trying to save, the homes just keep appreciating! There's a chance that you won't be able to save enough just to stay ahead of that appreciation! Thank goodness there are options with lower down payment! Such as 3% to 5%. In addition, we have access to grant programs that can cover some, if not all, of your down payment and closing costs allowing the potential for 0 money down! Keep in mind that a smaller down payment may result in higher monthly mortgage payments and additional costs like private mortgage insurance (PMI).
Next, consider your credit score, as it influences the interest rate you'll receive on your mortgage. A higher credit score typically leads to better rates.
Lastly, remember to account for closing costs, which can range from 2% to 5% of the home's purchase price. Lenders do allow for seller concessions to cover some or all of your closing costs. This would need to be negotiated with the seller and incorporated into your agreement.
By understanding your financial situation, setting a budget, and getting pre-approved for a mortgage, you can determine a comfortable and realistic price range for your first home.
If you're ready to take the next steps in your home buying journey or have more questions, I invite you to get in touch with me or any of our Realtors®. We're here to provide you with personalized guidance and expert advice to make your dream of homeownership a reality.
Let's connect and embark on this exciting adventure together.