How much home can I afford? It’s probably one of the most important questions that you will face after deciding to build a new home. There is no cookie-cutter response, but several variables can drive your decision.
The purpose of this post is to resolve the concerns that prospective buyers have about budgeting for building a new home.
Buying a house out of your budget range is one of the biggest problems that homebuyers face. It can cause frustrations and tension to buy a place that you can barely afford, but this is a scenario that you can prevent by remembering the tips below.
Follow the 28/36 Rule (Debt-To-Income Ratio)
It is recommended that as a property buyer, you should never spend more than 28% of your monthly income and not more than 36% of your total income for your new home build.
The basic formula to find your reasonable monthly budget goes like this: deduct your loans and other expenses from your total monthly income (after taxes), then multiply the difference by 25%.
Credit card bills, student loans, car payments, and mortgage loans are part of the debt and bill payments that should be deducted. Not exceeding this limit would allow you to remain consistent without any burden on your monthly mortgage.
Plan Your Down Payment
In getting a better mortgage rate, calculating your down payment budget may play a role. The larger your down payment is, the more you can afford to buy your dream home.
Saving a large down payment, particularly for first-time customers, is not always easy. Ideally, a down payment of 20% is a more realistic sum because you do not have to pay for any mortgage insurance. You can always go under that 20% range, but expect some additional expenses along the way.
You should also consider setting extra money aside, just in case there are additional expenses for the closing of the deal. Closing costs range from about 2–5% of the price of your new home build.
Seek Professional Advice
It’s always best to work with a professional when it comes to buying a house. Financial advisors are the best people to help you figure out if you can afford to buy a property with your current financial situation or just how much you can afford, if your ideal home is out of reach.
You can also communicate with loan officers who can help you find a mortgage that will be feasible for you. There are other options you can take as well. Your loan officer can lay out which options are available for you and your current situation.
The above tips are just for your reference. It’s still up to you how you will budget your monthly mortgage, but keep it as realistic as possible to avoid any problems.
When you want the best and you’re ready to get started on building your dream home, contact the experts at Premier Builders online or call (419) 794-5958.
