How much do you want to pay for a home?
There are many factors to consider once you know how much of a loan you qualify for, or if paying cash, how much cash you have available for the purchase. Total purchase price and the monthly payment are two of the most critical factors to consider. The total cost of buying a home is comprised of the purchase price plus closing costs. Closing costs are detailed in the Closing Section of the Guide Book. You need to be sure to include both costs in your calculations. Monthly payments include mortgage payment (principal and interest), taxes, insurance, and maintenance (or common charges, in the case of a condo).
The question is not always how much can you afford, but rather, How much do you feel comfortable purchasing? Many times a lender will approve you for a loan amount that is higher than you feel comfortable paying each month.
The pre-approval tells you how much of a loan you qualify for. You will need to consider how much money you have available for a down payment, the total purchase price, and the monthly payments to arrive at the purchase price range you feel comfortable with and can afford. For example, you may qualify for a $1,000,000 mortgage. However, you may not have enough cash to meet the minimum down payment requirement. In which case, you would reduce the loan amount to a level where your down payment is in synch with the purchase price. Another situation that arises is that you may qualify for a mortgage amount and have more than enough money for a down payment, but may not feel comfortable spending that much money every month on the mortgage payment, taxes, insurance, and maintenance (or common charges). In that case, you decide which payment you feel comfortable with making and that determines your target purchase price range.
All Neighborhoods