How Much House Can I Afford?
Everyone imagines building their dream house. The one that they have imagined since they were a kid. A house that does not just contain a family, but acts as a home. A place where everyone there feels welcome and cared for. When that dream starts to become a reality, other realistic limiters begin to come into play a slowly redefine what that dream house is going to look like. That is why it is important to understand how much house you really can afford.
Most people assume that the reason they can afford or not afford a specific type of home is due to their income. Though this is correct, there are many other factors that play into what exactly people can build that fits this budget. Here are four factors that influence how much house you really can afford:
1) Mortgage Application Fees:
These fees are also known as service fees, which usually range from 1-2.5% and are flat rates. This fee is a non-refundable fee that can add up to around $500. This assures that there is a service being provided to you by the mortgagee (representative from the mortgage company).
2) Earnest Money:
This is the first payment that is made to the seller once your offer on the property is accepted. This payment is usually 1-2% of the purchase price, and acts as a subliminal contract of good faith between the buyer and the seller. The advantage of this payment is that it is not directly paid to the seller but to the escrow company and only given to the seller once there is a clear contract created between the two parties, thus limiting the seller’s ability to run away with your money.
3) Down Payment:
The down payment on your mortgage ensures that you are going to pay for the home. It is encouraged to start with a high mortgage rate down payment that ranges between 15%-20%. Also, paying some of those mortgage points up front can help lower your payments. The higher the down payment is, the lower your money borrowed will be.
4) Closing Costs:
Closing costs on a new home include the following: mortgage points, attorney’s fees, inspections and surveys, title insurance and title search, escrow deposit, and city recording fees. The advantage to these payments is that they are all made at once rather than individually. This will relieve the buyer from having to handle all of these charges separately. Also, this list can usually be estimated by your lender in the beginning so you will have an idea of what your payments will be.
Overall, building or buying a home is a long and often crazy process. It involves a lot of moving parts that one person cannot handle alone. With the help of mortgage brokers, real estate agencies, and others, this process becomes more simple and allows for you to find the right home that fits your budget. So when you’re looking for that next beautiful place to live, remember these four parts and you’ll be sure to find yourself a home that is affordable and perfect for your lifestyle.
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About the Author | Debbie Hooker
Owner/ Listing & Buyer Specialist/ Broker / Realtor® NC/SC
Debbie joined Allen Tate after relocating to Charlotte from Florida and experiencing the challenges a family move can bring. Her passion to help others and her incredible work-ethic are one-of-a-kind. Debbie partnered with Andy in 2002, forming a team and becoming a top producer for the company, and has helped grow the team to what it is today.
Learn More About Debbie