Whether you’re buying a home for the first time or planning to upsize, downsize or relocate, thoughtful planning in terms of how much you should spend on your home makes sense. Beyond the size of mortgage you qualify for, thinking through additional expenses and your desired lifestyle before you begin the house hunt, will save time and help you make a smarter home-buying decision.
*Disclaimer: I am not a mortgage lender or financial adviser, and you should bring any and all questions of this nature to a financial professional. I do, however, have many years of experience in the Real Estate industry, and have worked with clients to buy and sell homes at a variety of price points for clients from all walks of life.
- Understand Debt to Income Ratio. A Qualified Mortgage will require that your debt to income ratio is no higher than 43% once you take on a mortgage. This means the sum total of all of your debts + your monthly mortgage payment can be no more than 43% of your gross income.
- Consider your personal financial situation. Do you have young children and accompanying daycare costs? Are you planning to have children? Are your insurance and medical costs stable? Will you need a newer vehicle in the near future? Do you plan to travel often? Know the answer to questions like these before you determine how much you are willing to spend on monthly mortgage payments.
- Consider all home expenses. How much will property insurance and property tax set you back? Will your loan require private mortgage insurance (PMI)? Does your new neighborhood have an HOA? Will your utilities increase significantly from your current situation?
- What will you do in an emergency? If home repairs arise, can you handle the additional demands on your budget? When you determine how much house to buy, consider setting aside a monthly amount to handle home repairs as they arise.
At the end of the day, information is POWER, and you should be as informed as possible in order to make the right decision about the affordability of your home purchase, and whether that purchase will fit in with your overall financial and life goals.
Are you ready to take the plunge, or move on to your next home? Drop a line. I’d be happy to help you navigate the competitive Denver Real Estate market.