How Much Home Can I Really Afford?

Whether you are buying your first home or another home...take the time to figure out how much home you can really afford.

Are you thinking about about buying a new home?  2013 is a great time to make a move in the Hampton Roads  real estate market. Interest rates are at historic lows. If you research and compare today's 30-year fixed-rate average of between 3 and 4 percent to the mid to upper teens of the 80's you'll see why everyone is excited about the great deals to be had!

Right now homes are now at their most affordable on record. Across the nation, and in Hampton Roads, home values have dropped. Additionally, there is also a supply of distressed properties on the market which can sell for steep discounts.

With all these awesome deals, it's easy to get excited and perhaps even get carried away.  Keep in mind the lessons learned by millions of homeowners...buy within your means. Just because you're approved for a certain amount does not mean a) you should spend that much or b) you can really afford that much.

So, how much home can you really afford? Think about the following questions:

How much do you make per month? If your pay fluctuates (i.e. such as commission work), it's critical to consider both high and low income months.  If you make a steady paycheck (i.e. a salaried job), it is simple to calculate, review your paystubs.

How much is your monthly debt? Look at your reoccurring monthly cost of car payments, credit cards, student loans, child support, alimony, and other debts that must be paid each month.

Job market...Is your job secure?Today's job market is a little shaky.  Could you still make your mortgage payment if you lost your job?   

How much does it cost you to live each month? This will be different than your monthly debt. These are the extra expenses we all have...these include utilities (gas/electric/cable), internet and cell phone, gas, groceries, entertainment, shopping, any travel, etc.

Longevity...How long are you staying? Homes do not, and will not, appreciate as they did in the last decade.  In order to build equity you need to commit to staying for at least five years (or plan on keeping the property and leasing it).  

How much money do you have in savings? In an ideal world, your lender would like for you to put at least 20% down, in addition to any closing costs.  Do you have $60,000 to put down on a $300,000 home?  If you don't, you will have to obtain Private Mortgage Insurance (PMI).  This will add to your monthly payment.

Your best bet is to find a good mortgage officer to help.  They are the experts...they can help you figure out the correct amount you can afford.  Give me a call at 757.754.3107 or email me at homes@duncanmacleod.info and I'll be glad to point you in the right direction.