How Much House Can I Afford...really?
Downpayments, Closing costs, Annual Interest Rates, Taxes, HOA fees...How much house can I really afford?
Knowing what you can afford when buying a home is huge!
Having the money saved up for the downpayment is a great first step. BUT it's only a first step. There are also closing costs involved and once you've got that covered you need to look at the monthly payment. Can you handle it...not just a few months but for the next 30 years? From my years of working with Buyers, I've learned you don't want to begin a search looking for a home before you have a budget firmly established. Ask yourself, are you still wanting to travel after you purchase your home? Do you still want to take those weekend getaway trips you've enjoyed? Are you needing to buy a new car in the next year or so? Look at your budget now and in the foreseeable future. You want to make sure that the house payment doesn't swallow up all of your take-home pay.
You want to set your expectations in line with your financial position and goals before you start looking. Keep asking yourself the questions. Are you renting now? What are you paying? Is that comfortable for you? Sometimes the house payment can actually be less than your rent. In that case, you already know how the payment will 'feel' as the months go on. But my point here is don't look at houses until you have a good idea of what you can, and want, to pay. Otherwise, you might be setting yourself up for disappointment. There's nothing more disappointing and disheartening than finding a house you love only to find out when all is said and done, the payments are much higher than you expected, or you don't qualify. ALSO keep in mind that just because you can qualify to purchase a home of xxx amount, and the high payments that go with it, doesn't mean it's the right decision for you. Staying within your means and budget when looking for a home makes all the difference. Don't look at homes that are twenty-five, fifty or a hundred thousand over your budget. Even if you are telling yourself you just want to check them out. I'm telling you, after seeing the more expensive home first, the home that's in your budget suddenly doesn't look as nice and that's not the way to start the process.
If you don't have a lender no worries, we can connect you with several great ones that can help you through the process. Often doing 'what if' scenarios help. What if I put down 3% what will my payments be? What if I put down 10% what does that get my payments to? Also, there are downpayment assistance programs out there still. So if you don't have enough money for a downpayment but have a good job with good credit, then you might qualify. Just ask and we'll get you started.
But if you're just 'itching' to know how much a house payment might be, here's is a simple mortgage calculator to get you started. This will only give you an idea of the monthly payments. You still will have to factor in the property taxes (Yep you're in Texas now...) There's a range for the taxes and you need to know the address to get the actual taxes but in the Kyle and Buda areas, for example, you can expect to add 2.7% to as much as 3.1% of the home's value to your annual payment. This means on a $200,000 house, the annual property taxes at a rate of 2.7% will be $5400. That's $450/month added to your principal and interest payment. If this is confusing or even overwhelming we'll get you with a lender so he/she can walk you through it.
I know if you're new to the process it might sound overwhelming and scary, but hey, that's why we're here. And the interest rates are still at an all-time low and that equates to lower house payments for you. If you know you are tired of renting and want a place to call your own and start building some equity, then you might want to consider jumping into the market now. And don't worry. We'll be beside you all the way, from helping you find a good lender to finding a house, to writing a contract and negotiating the deal, to inspections, all the way to the day you are given the keys to your new home Still wondering if you are ready to do this? Give us a call. We'd love to buy you a cup of coffee and answer any questions you might have.
Oh and if you're not a first time home buyer and you have a home to sell in order to finance your next home purchase, check out our SELLER INFORMATION PAGE.
MORTGAGE AMORTIZATION CALCULATOR -Principal and Interest only for Amortization Schedule
If you wonder how quickly you can pay off your loan by paying extra on your house payment, this might help. It ONLY reflects the Principal and Interest portion of your mortgage payment NOT your entire house payment as it does not include your property taxes or homeowners insurance, both of which are included in your total monthly payment. If you wondered about property tax rate, it varies by city, county, subdivision, sometimes even by street. So you need to know the address to get the exact rate. Once you have it the taxes are a quick calculation. For example; A $250,000 home in Kyle with an average tax rate of 2.8% would be calculated as follows: 250,000 x the rate (in our example 028) = 7000/year. Take that and divide by 12 months in the year and the tax portion of your monthly house payment $583.00. Yikes! it is a bit of a sticker shock for folks coming from out of state or new to the idea of property taxes.
But again this chart is handy to get an idea of how the loan is paid off over time. It's VERY front loaded with most of the money going to interest and not to the loan. So paying extra each year, even one extra payment a year, can dramatically knock off some fo the years till that final payment.
This mortgage calculator can be used to figure out monthly payments of a home mortgage loan, based on the home's sale price, the term of the loan desired, buyer's down payment percentage, and the loan's interest rate. This calculator factors in PMI (Private Mortgage Insurance) for loans where less than 20% is put as a down payment. Also taken into consideration are the town property taxes, and their effect on the total monthly mortgage payment.
Contact us for more information about financing your next real estate purchase.