Many factors come into play when you attempting to figure out how much you can afford in a new home. In addition to your monthly mortgage payment, there are closing costs, moving expenses, plus purchases and maintenance for the new home. The rule of thumb is generally considered, your gross income multiplied by 2.5, will give you an approximate amount for the price of home you can afford. The amount will vary depending on how much you have as a down payment, your debts, financial situation, and credit history and rating. Your debts, including alimony and child support, should not be more than 30 to 40 percent of your gross income.
Monthly Mortgage Payment
Lenders are very careful to make sure you have the ability to repay your loan. As a general rule, your monthly mortgage payment should be equal to or less than 25 percent of your gross monthly income.
Amount of Money needed at Closing
You will need money for down payment and closing costs, plus any move related expenses and maintenance or repair costs for your home. The down payment will generally fall between 3 ½ percent and 20 percent of your property value. Closing costs can be estimated somewhere between 2 and 7 percent of the property value.
Remember when getting ready to purchase a new home you should consult with a Professional Loan Officer and Realtor. They will help to guide you through the process and make it a very enjoyable and successful endeavor.
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