How much house can I afford?

That’s the first question most home buyers will ask. And it’s probably the most important one. How do you know what you can buy until you know what you can afford? You’d be surprised at how many people don’t ask that question up front and just start looking for homes on their own. There’s nothing wrong with looking at homes independently before you ever even contacted a loan officer. The trouble starts when they physically start to look at homes and decide they want to buy one before they’ve gone through the process.

Almost every home buyer I’ve ever worked with has been approved for more than they want to spend. There’s a big difference between what you want to spend and what the bank will loan you. The key is knowing where your comfort level is over and above everything else. What is a reasonable payment to make every month That is comfortable and doesn’t make you house poor.

The idea that you must put down 20% to purchase a home is simply not true there are different options out there with as little as 3 1/2% down. I’ll give you 3 quick scenarios with an average purchase price of $350,000. All of these are at the current rate today, 6.29%. This is just an average rate that I’ve taken off the Internet. It’s not locked in some will pay more and some will pay less depending on credit and other variables. There will also be a 3% closing costs that you will need to bring in addition to your down payment. I have other videos that explain how closing costs are broken down.

If you put down the following, this should give you a rough idea of payment including average price of taxes and insurance.

5% down or $17,500 your payment all in would be $2411 per month
10% down or $35,000 your payment all in would be $2303 per month
20% down or $70,000 your payment all in would be $2087 per month

As I had mentioned, everyone’s going to be different depending on how much you have for down payments, what your credit looks like and a lot of other pieces. But here’s a quick little scenario to give you an idea of what you’re looking at. Imagine if the interest rates come down how much better the payments will be. But I should caution you by saying that a half a percentage lower in rate doesn’t change the payment all that much. You really need to see the rates drop a full percentage point or more before you start to really see it difference.

The price is being offset a little bit by house prices coming down in some areas. There are a lot of great deals out there you need to know where to look for them.