Just how much you can afford on your first home?
Hey there, lovely dreamers and future homeowners!
So, you're about to take one of life's most exciting leaps – buying your very first home. Trust me; it's a journey filled with emotions, dreams, and possibilities, and I'm here to guide you every step of the way. Here’s how I recommend first-time homeowners figure out how much money they can spend on their first home.
1. Dream Big, but Stay Realistic
You've probably got a Pinterest board filled with dreamy interiors or a Zillow wish list that's bursting with inspiration. It's fantastic to dream big, but let's also keep our feet on the ground. Start by determining your budget. What can you comfortably afford without stretching your finances to the limit? Yes, quality is worth paying for; and you want your home to be a source of joy. Think about where you feel the most comfortable and head to step #2!
2. Do the Math: The 28/36 Rule, AND talk with a local lender
Here's a handy rule of thumb: the 28/36 rule. It suggests that your housing expenses (including mortgage, taxes, insurance, and HOA fees) should ideally be no more than 28% of your gross monthly income. Your total debt (that's housing expenses plus other debts like car payments and student loans) should be no more than 36%. This balance helps you maintain financial stability while enjoying your dream home.
There’s no internet tool or article though that substitutes for speaking with a great local loan officer. They often have access to special rates & tools to further incentivize home buying and allow your budget to stretch while keeping your monthly payment comfortable. Reach out to me & I’ll share my resources!
3. Get Familiar with Your Credit Score
Your credit score is like your golden ticket to getting the best mortgage rates. In general, higher your score, the lower your interest rate. So, before you embark on your home-buying journey, take a peek at your credit score. If it needs a little boost, work on improving it by paying bills on time and reducing outstanding debts. A lender will also have some tips & tools for boosting this score as well, so don’t hesitate to ask.
4. Down Payment
Ah, the down payment, often the biggest hurdle for first-time homebuyers. You’ve probably been taught that 20% of the home's purchase price is ideal, but did you know that even 5% will work for a conventional mortgage? There are plenty of programs that allow for smaller, easier to digest down payments, and we can explore your options. The more you can put down, however, the lower your monthly payments will be.
5. Get Pre-Approved, but pause for me to introduce you to the lenders that I trust
Before you start house hunting, it's a smart move to get pre-approved for a mortgage. This not only shows sellers you're a serious buyer but also helps you set a realistic budget for your search. If you’re interested in connecting with one of my preferred lenders, please reach out and schedule a quick call here. There’s never any obligation and I only recommend lenders I trust.
6. Factor in Closing Costs
Don't forget about closing costs, my friends. As a home buyer, these can include lender fees, appraisal fees, title insurance, and more. They typically add up to 2-5% of the home's purchase price, so be sure to have some savings set aside for this crucial step. I have a handy calculator - based on home price & location - so let’s talk.
7. Room to Grow
As you explore your budget, consider your future plans. Are you planning to start a family? Will your income change in the coming years? Leave a little wiggle room in your budget to account for life's exciting twists and turns.
8. Seek Professional Guidance
Last but not least, lean on a trusted realtor and financial advisor for expert guidance. I'm here for you, and my mission is to help you find not just a house but a home where your dreams can flourish.
This is your journey, your dream, and your investment. I'm here to provide the knowledge, support, and inspiration to help you make it a beautiful reality. Your first home is just around the corner, and I can't wait to see you walk through that door filled with joy, pride, and the feeling of "home." Cheers to your future, dear dreamer!
~ Candace
** Ready to start your adventure together? Like, save or share this post and reach out to me today.
