How much can you afford?

If you rent the home you live in or thinking about upgrading to a larger home or moving to another area, then the right planning could enable you to buy a home.

To discover your homebuying potential,  you will want to calculate your:

  • Income,
  • Savings,
  • Monthly expenses, and
  • Current Debt

These factors determine how much of a loan you can afford and how buying a home will affect your monthly budget, once you compute all your expenses.

What is your Income?

First you need to determine all of your sources of income. You will need money for your down payment and for your closing costs.  The FHA, VA and other mortgage programs may require smaller down payments.  In some cases the closing costs may sometimes be rolled into the mortgage or you can get seller assistance.

Here are a few questions to help you to estimate your financial position.
•    What is your average monthly income?
•    Do you expect your income to remain level in the near future?
•    If not, do you expect it to increase or decrease?

 

Use the following income categories to estimate your monthly income:

Income Category

Monthly

Borrower’s Salary $
Co-Borrower’s Salary $
Taxable Interest $
Investment Dividends $
Other Income $

How much will you need for your Down Payment?

Do you have Savings, Investments, Stocks or other Liquid
Add up your savings. Any money saved can help you buy a home. Your savings can be used to pay the down payment and/or closing costs. You know your own saving habits, the more you save the better and the more you put down on your house, the lower will be your monthly payment.

•    What portion of your income are you saving now?
•    Can you afford to put more money into savings?

Use the following savings categories to estimate your monthly savings.

Savings Category

Monthly

Savings Account $
Checking Account $
Retirement Fund Contributions $
Stocks, Mutual Fund Investments $
Other Savings $

Monthly Expenses – Do you know where your money is going?
How much are you spending each month? You can expect your monthly expenses to go up when you buy a home. Will you have enough money to pay the mortgage, insurance and property tax in addition to your other expenses?

Use the worksheet below to calculate the money you currently spend each month.

 

Expense Category

Monthly (current)

Utilities $
Car Expenses $
Insurance $
Medical Expenses $
Clothing $
Taxes $
Entertainment/Purchases $
Child Support $

How Much Debt do you Have?

Review your current debt obligations.  We examine the ratio of your debt to your income when deciding how much money to lend you.
Consider how additional debt from house payments, added to your existing debt, will affect your lifestyle.

Debt Category

Monthly

Credit Card $
Car Loans $
School Loans $
Alimony $
Child Support $
Other Personal Debt $

Wow! There is a lot to consider when buying a home.  Rest assured, if you are on this page right now you are on the right path.  Please feel free to let us know if you have any questions.

Still have questions?   Just give us a call at (302) 266-9500.