How much home can you afford?

January 1, 2013

One of the first questions clients ask us when talking about the price of their new home is "How much home can I afford?" With today's low mortgage rates and home affordability, the answer will amaze you.

 

First concentrate on monthly payments, not the overall price. Many home new build clients focus on the final price of their newly constructed home, the final price isn't what hits your bank account on a monthly basis - while you're monthly mortgage does.

 

Second sit down and figure out monthly income. To get a rough estimate of what monthly payments fit your budget, start with your monthly household pretax income. Commonly, your monthly loan expense should be about 1/3 of the amount your household brings in each month before taxes. Next, you'll need to calculate how much space you have in your monthly budget after other financial obligations. Add up your monthly debt obligations to make sure you'll have enough money left over to spend each month - a 40% ratio of debt to monthly pretax income is a good "rule of thumb" to follow. Just a hint, most lenders will do this for you when you go through the pre-qualification process.

 

Third there are few other things that can be taken into account. The interest you pay on your monthly mortgage payments is tax-deductible - meaning you'll be saving money on taxes each time you make your mortgage payment. Also, owning a new energy efficient green home will save you money. Your mortgage payments aren't the only monthly bill that will be affordable in your new home!

 

Once you've got a better understanding of the monthly payments you can afford, come in and see us! Otero Signature Homes designs and builds exceptional homes of the very finest quality and value. Visit our website today or call Ted Otero at 440-543-3333 so we can discuss building your dream home.