Assess your Financial Resources

Before you can begin to know how much home you are able to purchase, first you have to know much you are able to work with. Assess your resources in a few steps.

  1. Monthly Housing Expenses: How much you pay each month on housing. Consider how much room you have to pay more. As a homeowner, there will be continual expenses and repairs, on average ranging up to $3,000 or more per year.
  2. Gross Annual Income: How much the household takes in, annually, before taxes.
  3. Monthly debt: Credit cards, car payments, student loans, etc.
  4. Down Payment: Have you saved enough to put money down on a house? Remember that some of your savings will used to cover closing costs and other fees. If this amount of saving is not as much as you would like, you still have options. Besides the traditional 20% down, there are options for home buyers that range anywhere from 3% to 0% down.

Check Your Credit Score
Knowing your credit score is important so you can assess how much loan you will be able to take out, and what your interest rate will look like. There are several free credit estimation tools available online. These credit estimations are not official FICO scores, but for planning a home buying budget, it will put your score close enough.

Estimate Your Interest Rate
There are online tools to help estimate your mortgage interest rate, as well. Using your estimated credit score and the state you are planning on buying your home in, you can get a good idea of what your interest rate might be.

Estimate Your Annual Property Taxes
Property taxes vary from city to city, but the most important thing is to get a general idea. Municipal property tax rates are information that is readily available. The national average is just over $2,000 per year.

Use a Mortgage Calculator
Take all these numbers and plug them into a mortgage calculator. Find our mortgage calculator here.

Back to: How to Prepare to Buy a Home

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