How Much Home Can You Afford?
Find out how much home you can afford before you start house hunting
If you're thinking about buying a home you're probably wondering, 'how much home can I afford?' Getting pre-approved for a mortgage by your lender before you start house hunting can help you decide which neighborhoods and homes you should be looking at. However, just because you're pre-approved for a certain amount, doesn't mean you should start looking for homes in that range. Remember there are other expenses that come with owning a home like insurance, taxes, repairs and renovations.
Affordable home guidelines
To find an affordable home you first need to define what 'affordable' means to you. Most people can afford a home 2.5 times the amount of their annual salary. A good rule of thumb is that your total monthly housing payment, including insurance and taxes, shouldn't exceed 28% of your monthly income, and all of your debts should stay below 36% of that income. When you're out house hunting, try to keep the big picture in mind.
Finding a home you can afford starts with getting a mortgage pre-approved
If you're looking for a new home, you need to know how much of a fixed or adjustable-rate mortgage you'll be able to qualify for. Mortgage approval and the loan approval amount are based on several things, but lenders do take into account your credit rating and history. The price range of affordable homes is also likely to be lower if you're still paying off student loans and car payments.
What if you're just thinking about finding a home?
Maybe you're still researching, not sure if you're ready to make the leap into home ownership. To find out the answer to your question, 'How much home can I afford?' enter your individual income and liabilities into a mortgage calculator. This will give you a good idea of where to start looking and how much you need to save if you can't find the right home in that price range.
Saving for a home is more efficient when you know how much you need
When you know how much home you can afford, you can start saving for the home you want. Saving for a home early helps make sure you have enough for the 20% down payment required to avoid private mortgage insurance. Plus, the more you can save, the lower your mortgage will be. If an affordable home is $100-150,000, but you want something with more land and bedrooms that costs around $200,000, you know you need to get saving. Make sure you also have enough saved for the down payment, closing costs and mortgage points (if you choose to purchase them). As this probably won't be your only major purchase in the coming years, you should also account for other major expenses like college tuition and medical bills when determining how much home you can afford.
Take out a mortgage with Citizens Bank
Talk to a home loan originator from Citizens Bank at 1-888-514-2300 to get pre-approved for a mortgage and start the home-buying process. Whether you're a first time buyer, or you're moving for the fifth time, we can guide you through your home purchase and find a mortgage product that works best for you. When you're ready to apply for a mortgage, work with a trusted lender like Citizens Bank.