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Home Buying 101: How Much House Can You Afford?
Commentary
Brandon Cornett is one of our more popular contributors to
Educated Home Buyer. He has provided a series of articles for home
buyers who would like to know more about the home buying process.
Please be sure to check out his website for more great home buying
tips.
----------------------------------------------------------------------------Starting
a home buying process means answering a lot of
questions:
Are you ready to buy a home?
How much of a mortgage loan can you afford?
How's your credit?
What size house do you need?
How are your cash reserves?
The more Q&A, research and soul searching you do in advance,
the smoother the process will be later on. Let's look, then, at
one of the key questions from this list.
What Can You Afford?
Before house hunting, you should determine how much of a mortgage
you can comfortably afford. "Comfortably" means you can
pay your mortgage each month and still have money for living expenses,
savings, and quality-of-life niceties.
In other words, you don't want a mortgage payment that forces you
to "squeak by" each month.
To determine your mortgage comfort-zone, you need three things:
a budget, a price and a mortgage calculator. For the price, just
start with the cost of a house you think you might be interested
in buying.
At first, don't worry about whether the price is too high -- you'll
find that out soon enough when you run the numbers.
Next, run the home price through a mortgage calculator at current
interest rates and at a 30-year fixes mortgage. You might choose
a different mortgage type later on, but this exercise is just to
get a ballpark mortgage payment based on home price. So choose the
30-year fixed option for the sake of simplicity.
Mortgage calculators can easily be found on the Internet. Just type
"mortgage calculator" into any major search engine, and
you'll find several. Or, you can use the calculators we provide
at HomeBuyingInstitute.com.
Once you've obtained an approximate monthly payment for various
mortgage sizes, you can more accurately figure the price ranges
into your budget. It's a quick and easy way to see what homes are
inside your comfort zone -- and to find out exactly what your comfort
zone is in the first place.
----------------------------------------------------------------------------
About the author - Brandon Cornett
Brandon Cornett is the editor of HomeBuyingInstitute.com, one of
the Internet's largest and most respected libraries of home
buying information - more than 100 expert articles in 12 different
home buying categories! Put this knowledge to use by visiting http://www.HomeBuyingInstitute.com.
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