Searching for a new home can be very fun. That feeling when you have accomplished your life long dream of owning a home is special. Before you start the home buying process you must be realistic with yourself and calculate how much home you can afford. There are several different factors that will determine how much home you can afford.
One factor that affects how much home you can afford is you have to calculate your debt to income ratio. As a goal, you should aim to have your total monthly debt payments to be no more than 36% of your monthly income, so you can still allocate some money to other actives. So that means if you and your partner earn $5,000 a month you should aim to have a monthly debt payment around $1,800. This includes any credit card bills, car payments, and student loans.
Next, you should calculate how much you can afford to put down for your down payment. Making a larger down payment means a smaller monthly payment. It could also help lower your mortgage rate and help you avoid paying mortgage insurance.
A good credit score will also help you get a better interest rate which means you can take out a bigger loan without increasing your monthly mortgage payment. If you have a bad credit history receiving a favorable loan might be tough.
Lastly after you have calculated your debt to income ratio, how much you can put down for your down payment, and what your credit score is, you can use our mortgage calculator to see how much house you can afford. When using this mortgage calculator, you can adjust the mortgage amount, number of years, and the interest rate to find your affordable monthly payment.