Buying a house is exciting, but there’s a lot more to it than looking at houses online and picking one you like.
In fact, step one for any homebuyer is to do some homework – and that includes figuring out how much house you can afford.
How to Determine How Much House You Can Afford
If you’re borrowing money to buy a house, like most people do, lenders are going to want you to buy something that costs less than five times your annual household income. That’s just the way most lenders look at it when you’re making a 20 percent down payment and have decent credit.
If you’re spending less than 20 percent of the home’s purchase price on a down payment – unless you’re using a VA loan or another loan program that allows you to come up with less – your lender may want you to buy a home that’s even less costly than that.
Your lender is going to look at your debt-to-income ratio and want it to be lower than 36 percent. They’ll also want to make sure that no more than 28 percent of your monthly income to go toward your mortgage payment.
Your best bet is to apply for preapproval from a lender before you begin house-shopping. Your lender will tell you how much you’re eligible to borrow and you can start looking at homes in that price range.
Are You Buying a Home in Irvine?
Call us at 949-385-1684 or get in touch with us online to tell us what you want from your next home so we can help you find it.
In the meantime, check out our:
- Airport area real estate listings
- Central Park West homes for sale
- Columbus Grove homes for sale
- Cypress Village real estate listings