What You Need to Know About Buying a Home
Published: 09/14/2023
Ready to start thinking about buying a home? Congratulations! Before you start looking at listings, it’s important that you know how much you can spend.
When buying a home with a mortgage loan, you’ll likely need to have a down payment in cash. This can be anywhere between 10% and 20% of the sale price, but could be as low as 0% with some government-sponsored loan programs. Keep in mind that the less you put down, the higher your mortgage payment will be each month.
How much you pay each month depends on a few things: how much you borrow, the interest rate, and how long you’ll be paying for it. Keep in mind that there will probably be other upfront charges at time of closing, too.
The first step in figuring out how much you can spend is to talk to a lender. They can help you calculate your income and figure out how much you can afford on a monthly basis for your mortgage. Lenders will typically require you to spend less than 28% of your monthly income to pay your mortgage (including the loan, property taxes, and insurance). For example, if your gross pay is $54,000 a year, or $4,500 a month, your housing expenses could be up to $1,260 per month.
Your lender will also consider your other financial responsibilities, like your car payments, personal loans, credit cards, and other debts. They do not want these expenses plus your new mortgage to go over 36% of your monthly income. Basically, they want to make sure you’ll be able to actually pay your mortgage before they approve you for one.
If you’re looking to buy a home, our partner at Banzai has a great calculator to help you figure out how much mortgage you can afford.
When you’re ready to get the mortgage process started, contact your local Allegius branch, and learn more about our mortgage loans.