How Much Home Can I Afford?

Get A Mortgage Pre-Approval

An important ingredient and first step in a successful home search is knowing how much you can afford. You don’t want to fall in love with a property only to find out it’s outside your price range. Also, most any offer submitted on a home should include a mortgage pre-approval (or proof of funds if you are paying cash).

Banks and lenders use specific criteria to determine how much of a mortgage they’re willing to offer you. They look at your income, expenses, credit history and employment status, as well as the down payment you plan to make on a home. It may seem like a scary process, but it is actually straightforward. You can usually get a mortgage pre-approval in a day—you’ll be glad that you did.

Here are two advantages to getting this pre-approval:

  • It gives you the peace of mind of knowing you can afford homes you view on the market, and won’t have problems arranging financing.
  • It’s a sign to sellers that you are a serious, prepared buyer—this gives you the edge when making an offer.

Set Aside Cash:

Inspection, Down Payment, and Closing Costs

One other very important piece of the puzzle when buying a home is setting aside the cash you will need to complete the transaction.

You will need, typically, $350-$500 to purchase a home inspection from a professional. This is an essential part of understanding the home you’re about to buy.

You will also confirm with your lender the amount required for your down payment. There are many programs available, so don’t assume you can’t afford to buy a home. I can get you connected to lenders who will help you find out just what you need to accomplish your goal.

Finally, you will need to set aside some money for closing costs. These can include things like title insurance, loan fees, recording fees, mortgage insurance, and tax and insurance reserves. In general, most lenders suggest estimating your closing costs between 1% and 5% of the purchase price. I would suggest that between 1% and 2% of the purchase price is very common.

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