Owning a home is one of the American Dreams. Finding the right home is only one part of the equation during the home buying process in Destin, FL. Oftentimes, home buyers ask themselves “How much can I afford?” It’s a question that concerns us, as we don’t want to get in financial hot water. To help you start thinking about how much home you can afford, here are a few things to keep in mind:
Current Mortgage Rates:
You don’t want to buy a home when mortgage rates are outrageous. A great way to go about avoiding high interest rates is to track mortgage rate trends. To do this, simply visit the website located here.
Lifestyle and Future Plans:
The standard of living that you want to live according to, as well as your future plans, will largely affect the amount of money that you can put towards a monthly mortgage payment. For example, if you have the desire to drive a brand new car every few years, you will need to factor this into your monthly budget. If, however, you can settle for a $5,000 car every seven years, you will have much more money to apply towards a mortgage payment.
How Much Money You Make:
There is a general calculation that you can use to determine how much of a house payment you can afford: Annual gross income multiplied by 2.5. Keeping this in mind, if your annual gross income is $75,000, you will likely be able to afford a home worth about $187,500. However, this is not factoring in mortgage interest rates, etc. Keep this in mind when calculating how much home you can afford.
Even if you make $200,000 a year, if you are $250,000 in debt, you need to keep in mind that the general 2.5 calculation will not apply to you. Because of this, you need to take an in-depth look at your debts.
The larger down payment you have, the lower your monthly mortgage payment will be. It is usually best to put at least 20 percent down towards your home purchase; however, it is possible to qualify for loans that require only five percent down. Just remember, if you put down 20 percent, you will enjoy the benefit of not having to pay private mortgage insurance, which gives you additional money to pay on your mortgage loan.
If your current debts exceed more than 30 to 40 of your monthly gross income, you will likely have a hard time qualifying for a mortgage loan. If this is an issue for you, consider reducing your debts before you go about trying to buy a home.
Closing Costs and Other Fees:
When you buy a home, there are many fees that you will have to pay in addition to a down payment. For example, there tends to be real estate fees and closing costs. These fees are likely to exceed $5,000, so you need to factor in these expenses when calculating how much you can afford.
Buying a Home in Destin, FL
Owning your own home is a great endeavor to go on. Just keep in mind not to go over your monthly mortgage payment budget. Most of all, take into consideration that tips mentioned above when you calculate how much of a home you can afford.