When you decide that you’re ready to buy a house, it can be tempting to start searching for listings on Zillow or drive through your favorite neighborhood looking for “For Sale” signs. The last thing you want to do, however, is to find the perfect house and then realize it’s out of your price range.
The first step for every potential homebuyer is to identify a budget. Here are three tips to help you determine your price range.
What is your financial situation?
Before entering into a big purchase like buying a home, it is important to understand where you are financially. Review your monthly expenses and evaluate how much is going out each month. Check your savings account and determine how much you can comfortably afford to put toward a down payment.
Knowing your debt-to-income ratio is just as important as knowing your credit score when you get ready to apply for a home loan. Simply put, it is a comparison of your housing expenses and your monthly debt obligations versus how much you earn.
What tools are available?
If you like to play with scenarios and numbers, you can calculate how much you can spend on a new house. It’s easy when you have a tool like our Affordability Calculator that takes a lot of variables into account including income, debt payments, taxes and insurance information.
Have you pre-qualified?
The easiest way to determine your mortgage price range is to get pre-qualified.
The pre-qualified process starts with speaking to an experienced loan officer and providing information on your credit, income, assets and debts. Once the loan officer has all this data, he or she can turn around an estimate on how much home you can afford.
After getting pre-qualified, you are ready to hit the house-hunting market to find the perfect home within your price range. The best part about this is you can make an offer the same day you fall in love with a house because you got pre-qualified first.
If you’re interested in learning more about getting pre-qualified, contact a loan professional at ALCOVA Mortgage.