What Can You Afford?

Now that you know what you’re looking for, the next step is figuring out what you can afford. A review of your income, savings, monthly expenses, and debt will be necessary. Early on in the process, you’ll want to get pre-qualified for a mortgage loan, which helps determine how much you can afford. It enables you to move swiftly when you find the right home, especially when there are other interested buyers. It also indicates to the seller that you are serious and can afford to buy the property. A pre-approval is a simple calculation done by a mortgage lender that tells you the amount you’ll be able to finance through a loan and what your monthly payment will be. When you find a home to buy, a pre-approval also reassures the seller that you have the financial means to purchase his or her home. Know what you can afford is the first rule of home buying, and that depends on how much income and how much debt you have. It pays to check with several lenders before you start searching for a home. The price you can afford to pay for a home will depend on several factors, such as: gross income the funds you have available for the down payment, closing costs and cash reserves required by the lender your debt your credit history the type of mortgage you select current interest rates.