Community First Blog

How Much Home Can I Afford?

Buying a home is just a small part of the American dream. Many people feel more complete once they own their own house, as it is a tangible reward for years of hard work. If you are looking to buy a new home, whether it is your first home or you are a veteran home buyer, you have a lot of research and planning ahead of you. One of the most important things to determine is exactly how much home you are able to afford on your budget. Here are a few tips to help you calculate just how much you can spend on a new home.



Before making any purchase, it is imperative that you have a comprehensive budget established. First, make a list of all sources of income that you and your spouse have. Include alimony, child support and investment income, as well as your regular pay from your job. Next, tally up all monthly expenses that you have, from credit card and loan payments to utilities and other necessities. Don't stretch yourself too thin, though; don't forget to budget funds for clothing, entertainment and other variable expenses that are necessary to get through life. Finally, don't forget to set aside some of your monthly income for savings.



House Expenses

After you have a good handle on your budget, it's time to figure out how much you have left to go toward housing expenses. Owning a home is more than just a mortgage. You also have insurance and other expenses. Your utilities may also increase when you buy a new home, especially if you are graduating up from a small apartment. There may also be fees for a Homeowner's Association. And don't forget to set aside money in a separate account to fund any repairs and maintenance for your new home.


Other Considerations

When you apply for a mortgage loan, your credit history and credit score are the main factors in a lender offering you a mortgage in the amount you want. Your debt-to-income ratio is also a determining factor. Your lender may have other requirements that you must meet to obtain a mortgage loan. The home-buying process can be lengthy; don't get frustrated if things don't happen immediately. Taking your time and doing things right will ensure you get the right home for you and your family.


Play It Smart

Some homeowners stretch themselves too thin and buy more house than they can afford. One leaky pipe or windstorm can bring their well-constructed plans crashing down around them. This can cause borrowers to get behind on payments and eventually default on their mortgage. A short sale or foreclosure can severely damage your credit. While nothing is ever impossible, making sure you don't over-extend yourself or buy a more expensive home than you can afford can help you to avoid this costly situation.

By doing your research and making the necessary calculations now, you can save yourself from a lot of disappointment down the road. You can shop for homes within your price range with the knowledge that you can obtain financing at the home's price point. This also helps you avoid getting your heart set on a home outside of your price range. You can also have assurance that barring an emergency, you will be able to afford the costs associated with your home so you and your family will have a safe and beautiful place to call home for years to come.

For more tips on home buying, or assistance with determining your budget for a home purchase, give us a call today. One of our banking professionals will help you determine your goals so you can get the home you need for your family. You can also use our handy mortgage calculator to help you get started: Mortgage Calculator.


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