Home affordability

Zero in on how much home you can purchase

Buying a home is a huge decision, but it doesn’t have to be overwhelming.

There are industry experts such as Realtors and home lenders who have years of experience guiding people through the mortgage process. For those thinking of buying a home, one of the first questions is to ask how much home you can afford. “Buyers need to estimate the mortgage payment amount that best fits their personal budget. Secondly, they need to get prequalified with a mortgage lender,” said Tammie Bell, a broker associate/Realtor with TDECU Real Estate LLC. “Buyers need to keep in mind with a mortgage payment they will also need to factor in principal, interest, taxes and insurance. Often they may qualify for more than they are comfortable spending monthly. No one knows their spending habits better than themselves.” Bell said that when speaking at home buyer seminars, she reminds buyers that there are up-front costs as well as the expenses of being a homeowner. So they must be able to save monthly for a “rainy day” fund, to help cover future expenses of maintenance on their home. They should make sure to find a Realtor to represent them as a buyer through the entire process. At the start of the mortgage process, home buyers need to add up all of their monthly debt, which includes rent or mortgage, credit card payments, student loans, and car payments, among others. Once buyers know that, it’s easier to figure out the maximum monthly home payment they could handle. “We need to know what their budget is,” said Cathey Granello, a Realtor with BHGRE Gary Greene. “Prospective home buyers should get prequalified. We need to find out how much of a down payment they can make, and how much they can comfortably spend a month. We talk with them and work up different scenarios to see what works for them.”

Having a good credit history can help home buyers get a lower interest rate. Borrowers with a credit score of 740 or higher tend to get the best rates. Lenders look at a prospective home buyer’s debt-to-income ratio. The monthly housing payment (principal, interest, taxes and insurance) should not take up more than 28 percent of your income before taxes. They look at this because they want to make sure that a home buyer’s total debt payments aren’t too high in relation to income, and that they can be comfortably repaid. After all the paperwork is done, prospective home buyers can then enjoy the reward of settling into their new homes.

Home buying how-to

Find a Realtor to help with the home-buying process. Total up all debt. Figure out what you can afford. Get preapproved for a mortgage. Be able to save for a “rainy day” fund, for home maintenance expenses.

Buyeroften remind seminars buyers of the up-front costs as well as the expenses of being a homeowner.