Preparing to buy your first home can be an extremely stressful time. While there are a lot of bases to cover, one of the first questions you should get an answer to is “How much mortgage can you afford?” Figuring out your finances and uncovering what you’re able or willing to pay is an important first step in the house buying process.
Calculate Your Finances
The easiest way to figure out what you can pay is to take a long hard look at your money. Figuring out how much is coming in and how much is going out each month. There are tons of free financial calculators online, but your bank’s online services may offer a snapshot of where your money is going.
The basics to consider are:
- How much you make a month
- How much you pay for bills (car payment, insurance, student loans, credit cards, etc)
- How much you spend on groceries and gas
- Any additional expenses (gym memberships and other subscriptions)
Be sure to remember to include the amount of spending or savings money you want to use for something other than your mortgage payment. This should bring you to a pretty solid number or price range. Remember, if you’re buying a house with your significant other, you should count both incomes, but stick to a price you’re comfortable with.
Figure Out Your Mortgage Rate
Your mortgage rate can also impact how much you’re paying a month. A higher rate, for instance, might raise your payments, prompting you to consider a longer mortgage term agreement. Knowing your credit score and taking care of any problems on your credit report is crucial as you reach this stage.
You can easily find mortgage rate calculators online, but we recommend working with Firstar Financial in Indianapolis to figure out the best mortgage for you. Knowing what you’re willing to pay and what is an absolute deal breaker is key here.
Know Your Down Payment Options
Were you thinking about putting less money down on your home so you had some cash for new furniture or home improvement projects? While this isn’t a bad plan, be sure to really take a look at your options before putting less down on your home. While $1,000 might not make much of a difference, keeping $5-$10k instead of using it as a down payment can really impact your monthly mortgage payment. You might find a lower payment is more important than a kitchen renovation.
Do you have any other questions about figuring out how much of a mortgage you can afford? Let us know below.