How Do You Know If You Can Afford To Buy a House?
Do you feel that you’re ready to buy your first home? Tired of paying your landlord’s mortgage? Do you want to put down roots and start building equity for yourself? There are many reasons why people decide it could be time to buy a house. The costs associated with buying and owning a home can feel overwhelming but fortunately there are simple steps you can take to see if you can afford to buy a house.
Talk With a Lender
The best step you can take to buy a house is to find a good lender and meet to talk about your financial situation. Your lender will look at your income, savings and credit and then talk about your needs. They will help you explore the loan options available to you and the down payment, saving reserves and closing costs requirements.
Can You Afford the Mortgage?
Typically rent payments are less than a mortgage payment; this can feel unsettling until you understand the qualifying formula. Because mortgage interest is deductible (speak with your tax professional for exact details), most lenders look for the buyers to spend approximately 30% of their GROSS income on the loan payment and no more than 36% on all other debt.
- Ex. If your monthly gross income is $5000/month, you can spend $1500/month on your mortgage payment.
What Do Your Credit Scores Look Like?
Lenders use your credit score, along with other details from your financial history, to determine whether you qualify for a loan. But what credit score is needed to buy a house? You'll need at least a 580 FICO credit score to qualify for a Federal Housing Administration loan, but other programs may require a 620 FICO score or higher. If that's out of the question there is always credit solutions out there.
Do You Have The Help Of Local Realtors?
If you think you’re ready to buy a house, finding good local realtors is key, so you can tell them about your unique situation. Learn the costs and benefits to help you determine if you can afford to buy a house. We also put together a FREE quiz that helps determine if you can buy a house! Find the best way to buy a house.