Buying a home in Bryan, College Station is a fun and exciting process. If you are prepared, and have the right professional helping you, it will also be low stress. A home is the place where you can be yourself, showcase your personality, and spend much of your time for the next several years.
Your home will likely be the most expensive thing you will ever buy, and you want to make sure you find a place that fits your family's needs, has a good chance of appreciation in value, and does not place you in a stressful situation that you can not afford.
To help you determine if you are ready to buy a home, my first suggestion is to ask yourself a couple of questions:
- Is your source of income steady and reliable?
- Have you been employed for the last 2 years?
- Have you been keeping up with paying your current bills on time?
- Do you have at most only 2 or 3 long-term debts? (student loans or car payment)
- Do you have money in the bank to pay towards a home mortgage and closing costs?
- Can you afford the additional costs that home ownership brings? (maintenance, utilities, insurance, taxes, etc.)
When you think you are ready, the first place to start is to find out how much of a monthly mortgage payment you can afford. It is best to find out what you can afford before you start looking at homes. This way you know you are in the right price range and not wasting your time looking at something you can't have. This also means that you haven't missed out on something that was with in your budget and perfect for you!
To accomplish this goal, you will need to visit with a lender. This does not have to be the person you will end up using to complete your home loan, (you will shop around for that later). You just need a lender to pull your credit score (once) and consider your debt-to-income ratio.
Your Debt-to-Income ratio is a comparison of your pre-tax income to housing and non-housing expenses. Examples of Non-Housing expenses are things that are long-term debts, like child support, a car payment, a large credit card bill, or student loans. The lender will also look at the cash amount that you have available to place towards a home, what your purchasing expenses (closing costs for buying the home) will be and your past credit history.
The loan amount you are approved for does not always determine what price range you will be buying in, but it is a good place to start. Sometimes the lender will approve you for more than you feel comfortable, so you really need to pay attention to what your total expenses will be every month (your monthly payment) with that loan amount.
Typically, a good rule of thumb is that your monthly mortgage payment should be no more than 31% of your gross income and your mortgage payment combined with your non-housing expenses should be no more than 43% of your total income. In Bryan College Station, a good way to ball-park estimate what your monthly payment would be based on the price of the home, is to assume it is around 1%. For example, when you are considering a home that is $150,000 you can roughly estimate your monthly payment to be around $1,500 a month with taxes and insurance on a 30 year loan. Beware of online mortgage calculators that tell you what you can afford, as most do not consider taxes and insurance.
Happy Buying!
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