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What You Need to Know Before Buying a House You Need To Determine Affordability

For many, the process of shopping for a home is a mixture of fun, excitement, and even happiness. It can be emotional and inspiring to view all of the potential homes available to you, and many people find that home shopping is something they truly enjoy doing. But there are some things involved that aren't quite as much fun – but are just as important – as finding that perfect house.

One of the first things you'll need to do is to figure out your level of affordability. In other words, just how much can you afford to spend on a home? There are a few things you can keep in mind that will help with this, and remembering the following points will help ensure that you can understand just how your home fits into your budget.

  • First, understand that the total purchase price of your home isn't the final amount you'll pay. Due to closing costs, you'll probably have a few thousand extra dollars added to the final total. You can often negotiate for lower closing costs and in some cases even have the seller pay them, but don't overlook the closing costs when determining what you're going to pay.
  • The total price isn't what most people really look at when buying a home – it's the monthly payment they'll have to make in order to buy it. A lot of factors go into this including total sale price, but look more at interest rates. Low interest rates can reduce housing expenses tremendously, and the lower your rates, the cheaper your monthly payments will be.
  • Don't overlook the internet when you start trying to determine your monthly payments. Online mortgage calculators make it fast and easy to enter a few basic numbers and get an estimate of about what your monthly payments will be. These calculators are a great way to compare home prices or loan prices and determine which ones fit your budget.
  • You can also use home affordability calculators. These are similar to mortgage calculators, except they'll take info like your current income and your monthly expenses and give you an estimate of about what kind of mortgage payment you can afford each month. They're an easy way to get a clear idea of what kind of budget you're shopping on.

Knowing your affordability is important, since buying a home that you can actually afford is the key to ensuring that you don't risk losing your home due to inability to meet monthly payments. While lenders will actually use a debt to income ratio to help them figure out if you qualify for a home loan, having a clear idea as to what you can afford before you start shopping for a home is important as well. This way you know which homes are in your price range and what kind of expectations to have in terms of buying a home. The above points will help you ensure that you know what you can afford, and take you one step closer to the home of your dreams.

 

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