Buying a home is an exciting prospect, but you have to go into it with a realistic understanding of what you can afford. This can be confusing for many first-time buyers or current owners looking to upgrade, which is why the real estate team at RPP Sold Team of RE/MAX Plus, in Rochester, NY, wants to share a few tips to help. By following these rules of thumb, you’ll get an accurate idea of how to calculate a down payment, mortgage rates, as well as related expenses.
3 Tips to Figure Out How Much You Can Spend On a Home
1. Start With the 25 Percent Rule
You don’t want to purchase a home you won’t be able to pay for through mortgage payments. To avoid this, start with the 25 percent rule, as this is what most mortgage lenders will also use. When buying a house, your monthly mortgage payments shouldn’t exceed 25 percent of your monthly income. You need to assess current debts and bills, as well as typical monthly spending, as this will give you an accurate idea of what you can afford.
2. Consider Your Down Payment
A down payment is immediate and based solely on the cash at hand. The more of a down payment you put down, the less your monthly mortgage payments will be. The average payment that lenders prefer is at least 20 percent of the total price. If you’re not close to this number, think carefully about buying, as you may not be financially ready.
3. Check Your Credit
Unless you’re buying a home with cash, you’ll have to deal with a mortgage lender. The amount they’re willing to give you will play a major role in determining how much you can spend when buying a home. They base a significant amount of consideration off of your credit, so look at your score. If it’s lower, you may want to spend time paying off current debts and getting your credit score up before asking for a loan.
Buying a home is a major investment, and with time and patience, you’ll be able to get the best value from your decision. For trusted real estate assistance, turn to RPP Sold Team of RE/MAX Plus. They've helped over 2,500 families find new homes and are committed to helping buyers and sellers achieve the best results from their transactions. Call (585) 623-1500 today to speak with a real estate agent and visit their website and Facebook page to learn more.