how much house can I *REALLY* afford?
November 25, 2008 · Print This Article
Amanda ♥s Lucy, Allie & Tyler;; asked:
I’m 22 now and I hope to buy a house next year sometime… I’m aware that it’s going to be a lot “harder” to buy a house with all that’s going on and I want to do it the correct way. I also want to be sure I don’t get in over my head. Is there anything specific I need to know? What price ranges should I stay in? & How much should I plan to hand over for a down payment? Anything you know would be GREATLY appreciated!
I’m 22 now and I hope to buy a house next year sometime… I’m aware that it’s going to be a lot “harder” to buy a house with all that’s going on and I want to do it the correct way. I also want to be sure I don’t get in over my head. Is there anything specific I need to know? What price ranges should I stay in? & How much should I plan to hand over for a down payment? Anything you know would be GREATLY appreciated!
Josh Dunaway has been a certfied Realtor in the suburban Chicagoland area for over 20 years. Aside from starting his own real estate company, he also owns a mortgage company as well.
I think the rule of thumb was no more than three times your annual household income for the price of the house. Generally, you want to have 20% of the asking price in hand for the mortgage. You used to be able to get away with 10%, and carry mortgage insurance (PMI) for 2 years, but I don’t know if they’d let you do that in this financial climate. Good luck.
Price range is what is within your budget. down payment needs to be a minimum of 20% of total cost. Plus you need another 10k for closing. How much the mortgage lender will allow depends on your income and debt. You really need to do some research on real estate costs in your area and get that down payment saved.
Call a mortgage broker and get qualified. The advice is free. They only make money if you actually buy a house, and take a mortgage out through him/her.
Count on 20% down. You also need to pay for title insurance (about $4.50 per thousand) reimburse the pro-rated taxes paid in advance by the seller, get a house appraisal ($400+ depending on size and age)
buy a homeowner’s insurance policy and pay for the full year in advance, create an escrow account with the lender, and in some states, pay transfer tax ( that could be several thousand dollars).
You must also show job stability. Best of luck to you. Call the mortage broker first, then when you know what you can afford ( depending on your income, expenses, and current loans) you can call a realtor and start shopping!
always get a fixed rate mortgage. since you can’t get ninja loans anymore you should be prepared to put down a good size down payment. i suggest that you start by analyzing what kind of payment you are willing to pay. then use a loan calculator to find what loan amount that payment will support. then for 6 months or longer put the payment amount in a separate account and keep it there. this will tell you if you can really afford it or not because you are treating it like a real payment. then after the trial period you will have a nice sum to put down on the house you choose to buy
I know I could go out today and get pre-approved for way more loan than I could comfortably afford.
Plan on handing over at least 5% for down payment, 10% is better, 20% is terrific.
You are in control here, know your budget! That is the specific you should know. So many people got in trouble by trusting their mortgage lender to tell them how much they could afford. Control your financial destiny by knowing what works for you.