You want to be able to buy a home with confidence and know what you can comfortably afford before you buy. The trouble many buyers face is they qualify for more money to borrow than what they should actually spend, based on their monthly expenses. There are ways to save frustration while looking for a home, so you don’t put an offer on something where the mortgage payment could stretch you too far. Here are some points to consider:

How much can I qualify for?

The more appropriate question to ask is, “How much house can I afford?” It is best to start backward to determine what your budget can support. A person can qualify with their total debt being 55% of their gross income. Meaning, if you make $4000 a month, $2200 of that could be going to other debts, such as car payments, credit cards, or anything else. So you may qualify for a certain amount of money, but you must determine what amount will work into your budget with other expenses you already have.

What does your monthly budget support?

The better approach is to calculate your monthly budget first, including current debts or other monthly expenses, then you will be able to see how much of a mortgage payment you can realistically afford within that budget. For example, if you currently pay $1100 in rent, but feel you could do a house payment of $1200, have a loan officer help break down that total payment to help determine the cost of a house you should look for. There are certain items to consider that make up a total payment, so take those into consideration:

$1200 Total Payment

– $100 Property Taxes (estimate)

– $95 Mortgage Insurance (estimate)

– $35 Home Owners Insurance (estimate)
______________________________________________________________

$970 Mortgage Payment (Principal and Interest)

After determining the total monthly payment you can afford based on your budget, now your loan officer will help you also determine what your total loan amount should be to go along with that payment.

Don’t Over Extend Yourself

You may be able to qualify for more home on paper, but weigh all the other factors before you start shopping for your dream house. After you determine what you can afford based on your individual circumstance and budget, then start the hunt. You don’t want to end up a few months down the road, realizing you have over extended your budget. You don’t need that stress, and you definitely don’t want to end up in a foreclosure.

Talk to a Professional

It’s so important to sit down with a loan officer to discuss your options and go over your individual situation. Together you can determine a price and loan amount that will fit your needs.