If you are just setting out on the journey of buying a home, finding one that is in your price range may feel overwhelming. House hunting can be a long and drawn out process, and if you’ve only ever lived on rental properties, it can be difficult to figure out just how much home you can afford.
When you look for rental properties, the costs are very definite and clear cut. You will probably know exactly what your monthly payments will be and often, those monthly payments include the cost of utilities. When you apply for a mortgage, your costs are going to be vastly different, and making sure you can afford the monthly payments is a little more difficult. Here are some tips to help you make sure you are looking at homes inside your price range.
A Little Bit of Quick Math
Look at your gross income from the last year. Multiple that number by 2.5 or three. This is, in general, a very rough estimate of how much home you can afford. So, for example, if you make $50,000 a year, your price range will be in between $125,000 and $150,000.
It is important to remember that this is a very general rule of thumb and does not always apply to your situation. There are a lot of factors that are left out of this estimate, including insurance, taxes, HOA fees, etc.
Use a Mortgage Calculator
You can find a mortgage calculator just about anywhere online. These will allow you to enter more specific information about your income and financial state, which will then present you with a more definite monthly payment, based on the price of a home you want to purchase. Enter a variety of different home prices to find the range that you can actually afford. Start on the high end and work your way down until you get to the maximum you would want to pay each month in mortgage payments—that home price will be your upper limit.
Talk to a Professional
The best way to really know your price range is to talk to a financial expert. When you contact HomeSure Lending for a mortgage, we can help you look at your finances and your income to determine feasible monthly payments, and therefore feasible house prices for your unique situation.