When we think about how much home we can afford that is normally a common question we tend to ask ourselves.
We are dealing with a lot of different things in today’s society and because you live in a busy world and your life is filled with a daily schedule, you have to make sure that you are doing things that are going to benefit you.
This is why when we think about what home you can afford you have to make sure that you are making the correct decisions.
When it comes time to buy your home you want to make sure that you are purchasing your dream home but at the same time, you want to be able to make sure that you can make those monthly payments.
Yes, its one thing to get that home with the white picket fence that we dreamed of but we have to ensure that we will be able to stay in your dream home.
With interest still at a low point, this would be a good time to ensure you are getting more bang for your buck.
Remember, that homes come in all shapes and sizes and they come in all different price ranges. So how do you home much you can afford?
Factors to determine how much house you can afford
We are living in a world where entities are striving to make all tasks DIY. That said, you do not have to get an investment analyst to estimate what house will not lead you into financial strains.
Should you want to calculate how much home you can afford, the best tip to use is the rule of 28% / 36%. This states that you needn’t spend over 28% of the monthly income regarding the home correlated costs.
36% of the entire total debt such as loans like credit cards, mortgage, and credit cards etc., other factors you need to consider is inclusive of
• Income – funds that you regularly receive, like income from investments as well as salary. The income aids in establishing baselines for what you’re capable of afford to pay monthly.
However, remember your new home’s monthly installments will not be your sole expenditure. You may have a handsome pay but again have hefty bills waiting. Let the disposable income guide you here.
• Cash reserves – it’s the amount you possess to make down payments and cover closing costs. Probably it’s time to realize how useful a saving culture can be. You can utilize your investments and savings as well as other sources.
• Credit profile – Lenders everywhere track credit records of their clients and rate their creditworthiness. The credit score you possess will influence the perspective of a lender.
If you have a good credit rating, you are likely to have a higher borrowing capacity, and this could be just what you need to have your dream home.
Use a Mortgage Calculator
When you use a mortgage calculator it will calculate for you how much the monthly payments are based on the mortgage rate that you put in the calculator.
Mortgage Calculator
Price of Home:
All you have to do is put in the price of the home in that field.
You want to put what the down payment amount is going to be.
Interest Rate:
You can use the going market interest rate here. If you know that your credit is not so good then you want to add maybe 2 to 3 percent on top of the going market rates
Mortgage Term:
You’re going to put in how long you want to carry the mortgage note.
The PMI is normal for loans that are more than 80 percent. If you are paying a big down payment then the PMI will not apply.
This calculator only gives the mortgage monthly payment.
You will also need to calculate your taxes and your home insurance…
So in the example on a $250,000 home at a 5 percent interest rate, your monthly payment will be around $1,342.05. That did not include the PMI.
If you were to include the PMI in the above example the monthly payment would be $1,479.55.
But you have to include taxes and insurance as well to give you the full monthly payment amount.
In our above example let say you were purchasing a home in Plano Texas for $250,000.00. The taxes on the home your interest in shows to be around $4,882.00 non-exemption.
That means you do not have a homestead on the property and you do not have over 65 exemptions.
If we were to take that a divide it by 12 the monthly payment for your taxes would be $406.83. Now your monthly payment is around $1,886.38.
Now say that the property is in an area where there is HOA (Home Owners Association)
The HOA monthly dues are $238.00 a month. Now the monthly payment is around $2,124.38. Let’s not forget that you have to pay Home Insurance.
So the home insurance is going to run you around $2,000.00 a year. In order to get an idea estimate, you will need to contact your Insurance Agent or Loan Officer when getting a loan.
If we take that $2,000.00 divide it by 12 we get $200.00 a month.
Now our monthly payment is around $2,324.38. So you will need to make sure you can pay $2,324.38 a month. This is the monthly payment for a $250,000.00 with HOA dues.
Budget Sheet
Another good thing to have when you are dealing with the home buying process and trying to find out home much home you can afford is a budge sheet.
When you use a budget sheet a budge sheet will allow you a chance to fill in your income and expense.
This is good to have because it will let you know where you are on your budget when you are trying to deal with how much home you can afford.
When you use a budget sheet you can easily put in your numbers and be able to find out wither or not a home works for you or not.
With a budget sheet at hand, you can make sure that you can easily make your mortgage payments. Also, the budget sheet will let you know how much you have leftover after all expenses are paid.
This is a good scenario to go over. Because you are asking yourself what if I decide to buy this house for $3,100.00 a month what would my bottom-line look like?
The goal would be to make sure you are still OK and able to continue with your normal life without having to worry about making only mortgage payments but not have enough finances to do anything else.
In the form above it gives you detail information on filling out your budget. Once you have filled out the budget sheet at the end it will let you know what your cash flow is.
This is very important to know so that you can make sure that you are buying a home that you know that you will be able to make the monthly payments every month.
The budget sheet has most of the necessary expense to determine what your budget is.
All you have to do is when you get your Approval letter from the Lender you will then need to fill in the budget sheet.
You want to put in the monthly payment amount that the lender told you that you would be paying.
By running these numbers it will help you to make a solid decision when its time to make the offer.
When you put in your numbers and you find out that the bottom-line cash flow is negative.
Then you know that you will either have to make more money to pay the difference or you will need to find a home that is more affordable to your monthly budget.
he above form is easy to fill out. I created it so that all you have to do is put in your numbers and it will calculate everything for you. You can even make the necessary changes if you need to.
If you would like to receive the budget sheet fill out your information below:
If you are trying to find some homes that might fit your budget. Here are a few other types of homes to consider on a budget:
Tiny Houses
Please, this isn’t an insult to you. Besides, who said that large spacious homes make great homes? Living in a tiny home is an excellent achievement in various aspects that you won’t find the size a feeling issue.
Small houses can be built by wood, stone, bricks hence reducing the material costs drastically. Apart from that, it will create a comfy place for you to stay in as long as you want. Besides, it is simple to build while making it simple to manage it.
Wait, it also becomes easy to decorate a tiny home. Hence it would be noteworthy to consider it seriously as a cheaper alternative.
Silo Homes
Yes, it sounds crazy. It’s a more insane idea than living in shipping containers or even RV. So, does living in a silo home excite your fantasy? Of all the places you could imagine, Silo homes are the best affordable alternatives you can go for.
A silo possesses extreme peculiarity for those planning to live in affordable dwellings. Silos are typically utilized for storing agricultural produce.
However, you can use it for yourself as a source of shelter. Silos are typically round, and that is one thing that could be of interest to you. Therefore when you are tweaking decorating, remodeling, re-facing, inside it, you’ll be doing it in a peculiar space. Besides, the walls are round and don’t end.
At first, no corners could be awkward, but they will end up being soothing. It’s a different change that will create equal spacious partitions everywhere equally.
The partitions that you end up creating will depend on your preferences, while the decor is all about your imagination. There’s a lot you can accomplish with it. Besides, the exteriors needn’t be in a state of original drab too. Decorate and paint it as you like.
Cooperative Housings
Should you want to join cooperatives, it’s imminent to be a shareholder and a registered member of that co-op who possesses it.
By doing so, you will be unequivocally qualified to take up a unit within that property. Every member will be making monthly payments on the shares they took rather than rent or mortgage.
Besides, they are entitled to be partially responsible for some of the building’s maintenance. Co-ops often are inexpensive compared to traditional apartments.
This is because ensuring that the resources of members are pooled together makes it easy to leverage their purchasing power hence lowering the overall cost.
Living in such apartments will ease your cost of living.
Existing Development
Pre existential developments could be easily adapted and renovated to be affordable housing. These are existential market-rate complexes and apartments that could be fading away. They can be inclusive of reusable adaptive strategies like old schools and vacant offices and complexes.
Earth Berms
Have you ever heard of the folklore of a hobbit living in a hole? That was a famous line by Tolkien, a legendary curator of Legendarily and an oxford professor. His book is a top-selling. Nonetheless, what he describes is what we currently refer to as earth berms.
These are underground homes that possess a single facing entrance, which is unbelievable.
The idea is unique and executes beautification that everyone would love admiring. The interior is earthen, and it often doesn’t require you to furnish the walls entirely too.
The rocks can be utilized as one of the natural elements in a house. Besides, its temperature is well balanced, and it’s something you would fancy to create precisely in an appropriate hobbit style.
Conclusion:
Finding your dream home is definitely the goal at the end of the day. You have to keep in mind these things when you are wanting to know how much you can afford.
You want to make sure that when you put in the offer on your home, you are making a good solid decision when it comes time to make your offer.
Also, there are many options when thinking about the types of homes you can afford and the type of homes you can purchase.