Today we are answering the big question we are asked during the spring selling season, “How much home can I afford?”
Every case is different, but your affordability mostly depends on your income and other financial obligations. The general rule of thumb is that you can afford approximately 30% of your gross monthly income on a house payment. They are going to also allow 10% of your monthly income towards other debts, without it negatively affecting your mortgage.
It’s a good idea to check your credit score and make sure it’s where it needs to be. The minimum score to get an FHA mortgage is 580, and for a conventional mortgage it’s 620. The higher your score, the better loan you’ll get.
Your lender is going to want to see a history of your income, as well as the ability to predict where you income will be in the future.
There is a myth out there that you have to have a 20% down payment in order to get a loan. We’ve got programs available for as low as 3% down, and even lower in some cases. Consider this myth busted.
Now, loan terms will affect how much your payment is each month and how much you can qualify for. If you really want to knock it out quick, you can get a 10-year or 15-year loan, but most people choose 30-year terms.
If you are curious as to what kind of home you can afford, click here to use our home affordability calculator. We also have a monthly payment calendar to give you an idea of what your payment will be.