“How Much House Can I Afford?”
This is probably one of the first questions that pop up into your head when you thought about buying a home. If you are thinking of buying a house in Greenville, South Carolina and wondering how much house you can afford, the answer to your question will need a little digging in your financial background. Looking at your financial situation and weighing if you have the financial capacity to buy a home can give you a general idea, but to be precise, here are the factors that you need to consider in determining how much house you can afford.
Factors in Finding How Much House Can I Afford?
Your income compared to your monthly living expenses
Taking a look at your income you can have a rough idea if you can afford to buy a home, the higher your income the more you will be able to afford. Regardless of how much money you make, you shouldn’t put a big portion of it towards your housing expenses. The standard rule is that your monthly housing expenses should not take up more than 28 percent of your income before taxes. To calculate your monthly living expenses, add up your expected housing expenses (monthly mortgage payment, real estate taxes, insurances, HOA dues, etc) and divide it by how much you earn each month before taxes. For example, if your total expenses amount to $1200 and your monthly gross income is $5000, your ratio is 24 percent.
Your debt-to-income ratio
Debt-to-income ratios compare your monthly income to your monthly debt obligations (housing costs, student loans, car loans, medical expenses, etc.). As a general rule, your total debt should not exceed 36 percent of your monthly gross. Your debt-to-income ratios help mortgage lenders assess your financial strength and it prevents you from getting a home you can’t really afford.
In order to figure your DTI ratio, add up the minimum payments you make on all your loans, plus your potential mortgage payment. Then, divide this by your gross monthly income. If your gross monthly income is $5,000, your total debt payments can’t amount to more than $1,800 each month.
Your down payment is the first lump sum of cash that you must put down towards paying for the home. The typical down payment is 20 percent of the home’s purchase price, though it is possible to put down 10, 5, or even 0 percent. Quite simply, when you put a large down payment into the property upfront the lender is more likely to offer you a bigger mortgage loan and/or a lower interest rate.
Added costs of homeownership
When figuring out how much house you can afford, you also have to think about additional costs of homeownership because home affordability isn’t just about mortgage payments. You also have to consider other added costs such as closing costs, insurance, taxes, moving costs, and the upkeep. Would you be able to set aside a budget to help cover these added costs?
Your lifestyle and long-term goals
You also have to factor in your lifestyle and your long-term goals because it will affect how much house you can afford. If you spend a lot of money on the latest technology, clothes, travels, or other things, you will have less money left over to buy a house. Will you be settling down soon and expecting a two-income family? Will you be starting a business later? Will you be expecting a job transfer? You can take into consideration your long-term goals and lifestyle because it can affect you down the road.
Buying a Home in Greenville, South Carolina
Whether you are buying a Greenville, South Carolina real estate for investment, retirement home, or your dream home, it is wise to buy a home that you can really afford. Online resources that calculate how much house you can afford like this free spreadsheet can give you a rough estimate but it is still better to consult with your bank or financial adviser. Your bank officer will help you determine how much house you can afford, how much you’ll be able to finance through a loan, and what your monthly payments will be. That will give you a definite idea of your price range and you can target your home search based on your qualification.
Greenville, SC offers a wide range of housing options with price ranges that appeal to families and individuals of all income levels. Below you can search for homes in Greenville, SC. You can narrow down your search if you use the filter option so you can see property listings that fit your price range.