NATIONAL MARKET UPDATE New Home Sales were up 1.6% in December, ending the year up 15.2% from a year ago. Sales in 2020 of new single-family homes were the best in
How Much Home Can I Afford?
Dated: January 28 2021
Buying a home is a big decision and it's very important to educate and prepare yourself as much as possible in advance. Since buying and financing a home go hand in hand, learning how much you can actually afford is critical.
When it comes time to find your first or next home, it's important to know your affordability factor:
Generally, you'll need a 40% Debt To Income Ratio (DTIR) or better.
Next, try to anticipate future life events in the next five years. Are you planning to get married, start a family, will you need a new car or are elderly parents going to need help? All of these events could raise your Debt-To-Income Ratio by over 50%.
Plan for the house you can afford TODAY, not a few years from now.
Going through the mortgage application process to obtain a pre-approval can also help you understand how much house you can actually afford. It also places you in a much better position when you're ready to make an offer.
Don't forget your PITI (Payment, Insurance, Taxes, and Interest) that are generally clumped all together. In some states, property taxes and insurance are incorporated in their mortgage calculation. These are added to your monthly mortgage payment.
Affording a home is easier now with great new programs such as the Fannie Mae Home Ready Program which grants you up to 97% Loan to Value on your purchase. That means instead of forking out 10, 15, or even 20% down payment, you only need to provide as little as 3% down!
Here is a great video that will help you decide how much home you can afford. Ready to get started? Give me a call and I'll put you in touch with some top-notch lenders who have assisted many of my buyers in the past. Give me a call or text us today at 248-479-3820.
Josh Murray is The Broker Owner of Linked Realty, a firm that specializes in all aspects of Residential Real Estate in Metro Detroit. Josh Murray received Hour Detroit's Top 5% of Realtors in Metro De....