Numbers rule almost every aspect of a home purchase. You need a decent credit score. This qualifies you for better interest rates as well as approval for a mortgage loan. But, for Havasu home buyers, how much can you really afford when it comes to your monthly mortgage payment?
Havasu Home Buyers: The Affordability Factor
Banks tell Havasu home buyers the amount they are approved for when it comes to a home loan. However, that doesn't necessarily mean that this number is affordable for your lifestyle. Consider the following factors when determining if the "approved" amount falls within your "affordable" range.
How Much Have You Saved for Your Downpayment?
While you can find loans that require less, financial experts all agree that putting 20% of the asking price down puts you in a great position for a mortgage loan. You avoid PMI (private mortgage insurance), your monthly payment is much lower, and you appear very attractive to lenders. First-time buyers qualify with just 3-3.5% down. Many conventional loans ask for a minimum of 5%. And veterans can purchase a property with zero money down. Even if you don't use the entire 20% towards your down, you'll feel much more comfortable knowing that it's there.
Havasu home buyers need to keep the debt they carry to no more than 43% of their gross income per month. Less is better. When I say "debt", I mean your mortgage payment, student loans, credit card debt, car leases/loans, etc. Some banks require a smaller debt-to-income ratio while others allow as much as 45%. The lower your debt, the better off you'll be.
Do you enjoy traveling? How often do you dine out? What type of entertainment do you enjoy? Owning a home is ideal. But you don't want to be chained to it because you can't afford to do anything else. Take a realistic look at how much you spend each month and what you spend it on. Add this to all your other expenses to determine what will comfortably fit within your budget.
Havasu home buyers need to consider their affordability factor when buying a home. Charles Schwab provides an excellent comprehensive mortgage affordability calculator. Plug in your income, loan payments, debt, desired terms, projected interest rate, and expected taxes. Based on these calculations, it gives you an estimate of what you should be able to afford. When you're ready to start looking for your next Havasu home, contact me.