How Much Mortgage Can I Afford?
Buying a home is one of the biggest purchases you will ever make. It’s also one of the most expensive purchases you will make so asking yourself how much mortgage you can afford is key! The first step to becoming a homeowner is determining how much home you can afford. According to Nerd Wallet, there are a few factors that determine how much mortgage you can afford including income, available funds, expenses, and credit score.
How Much Mortgage Can I Afford? Determining Factors
- Income: When deciding how much mortgage you can afford you need to take your income into consideration. Your income is the money that you receive on a regular basis either through work or investments. Keep in mind that your income is the actual money that you receive, not what you are expecting to get paid in the future. Using your true income is very important in order to establish a baseline for what you can afford to pay on your mortgage every month.
- Available Funds: You also need to consider the amount of money you have available for closing costs and a down payment. These two elements are often times overlooked when determining how much home someone can afford.
- Expenses: Before deciding how much mortgage you can afford, sit down and think about additional monthly expenses. It is very important that you do not forget about other financial obligations when deciding how much home you can afford.
- Credit Score: Your credit score impacts your ability to get a mortgage loan, as well as the rate that you will pay. The higher your credit score, the better the rate you will get.
CNN Money advises that in order to arrive at a home price that is affordable, your total debt payments should not be more than 36% of your gross income. According to CNN Money, this guideline has historically shown what the majority of borrowers can comfortably repay each month.
Use A Mortgage Calculator
Now that you know how much mortgage you can afford, it’s time to use a mortgage affordability calculator to determine what your monthly payment would look like. Launch CU offers a few mortgage affordability calculators including:
- How Much Home Can I Afford?: This calculator takes your income, monthly debts, annual interest rate you wish to pay, loan term (years), estimated yearly property taxes, and estimated yearly property insurance to determine how much mortgage you can afford.
- Mortgage Payment Calculator: You can use this calculator to help you come up with an estimated monthly mortgage payment based upon information that you input.
Knowing what you can afford before you apply will make the process much easier. In addition, make sure to do adequate research on the area that you want to live in and if you would like to purchase a new or used home. Buying a home is a long-term commitment. Remember, we are here to help every step of the way. Our goal is to help you unlock doors to your future for less.