How Much Home Can You Afford?

How Much Home Can You Afford?

When looking for a new home,  the first question most people ask is — how much can I afford?  But price is just one of the things that impacts the purchase — it’s important to also look at the overall coast in the long run.   A major factor determining this is your mortgage rate.

“Mortgage rates play a huge factor in determining how much you can afford to pay.  Today’s low rates are off-setting rising home prices, because it’s less expensive to borrow money,” explains Lee Shilare, a REALTOR with ERA Justin Realty.  “The lower your interest rate the more you can save over the life of your home loan.”

According to Mortgage News Daily, home ownership is the most affordable it’s been since 2016.  Those shopping for a home can afford 10 percent more home than they could have one year ago while keeping their monthly payment unchanged.   This translates into nearly $32,000 more buying power.

How To Determine What You Can Afford

“Key factors in calculating affordability are  your monthly income; cash reserves to cover your down payment and closing costs; your monthly expenses;  and your credit profile,” says Lee.

Income –  your salary any/or returns from investments. Your income helps establish a baseline for what you can afford to pay every month.

Cash reserves – Savings, investments or other sources you can use for a down payment and closing costs.

Debt and expenses – credit cards, car payments, student loans, groceries, utilities, insurance, etc.

Credit profile – Your credit score plus the amount of debt you owe are influential in how much money a lender will approve you to borrow and the mortgage interest rate you’ll earn. 

Bottom Line

When purchasing a home, it’s important to think about the overall cost, not just the price of the house. Homes on your wish list may be more affordable today than you think. Call 201-939-7500 to connect with Lee or any of our knowledgeable agents At ERA Justin Realty to discuss your long term homeownership goals and determine your own price affordability range.