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Donna Bise
CENTURY 21 Shamrock Realty
464 East Main Street
Suite A
Abingdon, VA 24210
Mobile: 276-608-0060
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Can You Afford to Buy a House?

While everyone would like to live the American Dream of buying and owning a Home it is important to understand all the costs involved in buying and owning a home.  The first step is to contact the mortgage lender of your choice to determine if you are ready to purchase a home and to find out how much you qualify for.  When speaking with your lender you will need to ask for a pre-approval letter defining the type of loan you qualify for and the price you are able to pay for your new home.  Obtaining a pre-approval letter is a very important step.

When speaking with a Realtor they will need to know your range any type of financing before you begin looking. Some properties will not qualify for all types of financing.  Also, when you find your dream house you will have an advantage in negotiating with the seller if you provide a pre-approval letter with your offer.

Things to consider: Many potential buyers sometimes forget to factor in the down payment, homeowners insurance and the possibility of depreciation, as well as the costs associated with closing the transaction, moving, purchasing major appliances, and home, landscape and pool maintenance, not to mention furnishings and design accessories once you move in.

For a general idea of your buying power, multiply your annual gross income by 2½. For example, if you had a household income of $50,000, you might be able to qualify for a $125,000 home. The actual number may be more or less, depending upon your individual situation, debts and credit history.

Housing Expense Ratio

As a general guide your monthly mortgage payment should be less than or equal to a percentage of your income, usually about a quarter of your gross monthly income. The percentage can change depending on the type of mortgage you choose. However, there are mortgage products available that focus solely on the debt-to-income ratio. Your lender can provide more information on these types of mortgage products.

Debt-to-Income

Your buying power can be affected by factors such as your income, debt and credit history. Your debt, such as credit card bills and car loans, and other expenses such as housing expenses, alimony and child support, should not be more than about 30-40% of your gross income.

How Much Money Do I Need to Buy a Home?

You'll need money for:

1.) A down payment
2.) Closing costs
3.) Other housing-related costs – mortgage payments, maintenance and repair costs

Your Down Payment

The down payment is a percentage of the value of the property. What percentage that is will be determined by the type of mortgage you select. Down payments usually range from 3 to 20% of the property value.

You may be required to have Private Mortgage Insurance (PMI or MI) if your down payment is less than 20%.

Closing Costs

Closing costs include points, taxes, title insurance, financing costs and items that must be prepaid or escrowed and other settlement costs. These costs generally range between 2-7% of the property value. You will receive an estimate of these costs from your lender after you apply for a mortgage.

While it may seem that it can take a lot to actually buy your home, you may be closer than you think.


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