Knowing what you can afford is every bit as important in the home finding process as knowing what kind of home you want. Affordability includes three things: how much money you will need to borrow, how much you have for a down payment, and what you can comfortably afford as a monthly payment.
Set a budget for yourself and decide how much you are comfortable with and how much you can afford to invest. Be realistic! Most lenders suggest that your payments be no more than 28 percent of your total monthly income.
To better estimate what you can afford, use an affordability calculator, such as this one from Lending Tree. It is wise to avoid taking out the largest loan possible because you can risk becoming “house poor” with little or no money left over each month for savings, vacations, or emergencies. Keep in mind the lifestyle you want to enjoy!
Once you have a payment range in mind, talk to a lender to investigate your financing options and begin the pre-approval process.
If you have questions about interest rates, down payments, loans, or other financial issues, just ask!