Buyers - Cost and Financing

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How much home can you afford? Knowing your price range brings your house-hunting into focus. Since most people will borrow money for their house purchase, it helps to look at your finances from the lender's viewpoint.

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The amount of money a lender will loan you depends primarily on how much you can afford for the monthly payment, and how much you can invest in the down payment.

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Monthly payments consist of the principal and interest on the mortgage loan, as well as property taxes and homeowner's insurance. These four costs are often abbreviated as PITI.

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The larger the down payment, the less you need to borrow, which means a lower monthly payment. The obvious source of money for your down payment is either your savings or the proceeds from the sale of a home you already own. There are, however, special financing programs available that you should also consider.  The mortgage lenders will have knowledge of these special programs.

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Conventional loans require a down payment as low as 5 percent of the purchase price of the home. You may be required to buy private mortgage insurance (PMI) with a down payment of less than 20 percent or in special higher risk situations. This insurance protects the lender in case of default and allows the lender to approve a larger mortgage amount than would otherwise be approved.

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There are a multitude of financing options, including conventional mortgages, adjustable rate mortgages, and balloon mortgages as well as special financing programs. Mortgages are available from the Federal Housing Administration (FHA Loans) and the Veteran's Administration (VA Loans).

Based on information you provide, Semonin's FINANCIAL CALCULATOR will calculate a quick and dirty amount of how much home you can afford to buy.  This will give you some ball park numbers to take to a mortgage lender like our affiliate Prosperity Home Mortgage to start your discussions about the amount of mortgage you can afford and desire.  Click here to use the financial calculator.

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It's a good idea to get pre-qualified, or better yet, pre-approved before you start searching for your home. An offer to purchase presented by a pre-approved buyer stands a better chance of being accepted if there are multiple offers on a property. Contact a Prosperity Home Mortgage consultant if you'd like to set up a personal consultation to get a pre-qualification or pre-approval certificate to go with your offer to purchase. 

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