How much home can I afford?
The best way to find out how much home you can afford is to speak with a loan officer, discuss your options and apply for pre-approval.
Being pre-approved will speed up the process so when you find your dream home, you can act quickly before someone else has time to place an offer on the home you are considering. Being pre-approved also shows the seller you are prepared and serious about buying a home.
To get a quick and rough estimate on what you can afford fill out the form below and click on calculate the table on the right will give you an idea of how much you can spend.
Pre-qualified vs. Pre-approved?
Pre-qualified is an estimate of amount of money you may be able to qualify to borrow. Pre-qualification is typically based on general questions about your income, debt, assets and credit history. However, being pre-qualified does not count for much these days.
Pre-approved means you have applied for a mortgage and the lender has reviewed your credit report and verified your employment, assets, etc. When you are pre-approved, the lender lets you know the exact maximum loan amount you qualify for.
If you are competing with other buyers, being pre-approved gives you credibility and lets the seller know immediately that you will qualify for a loan to buy their property. When you are pre-approved, the seller knows how much home you can afford.
Why you should not make any major credit purchases.
Don't think that just because you’re pre-approved, you can go on a spending spree using credit. When you are thinking about buying a home or in the process of buying a home, your mortgage pre-approval is subject to a final evaluation of your financial situation when you go to close the purchase of your new home.
Every $100 you pay per month on a credit payment could cost you approximately $10,000 in home eligibility.
For example, if you buy a new car after being pre-approved, but before you close on your house, a car payment of $400.00 per month could mean that you now qualify for a loan $40,000 less than you originally did when you were first pre-approved.
Even if you have enough in your savings, you should not make any large purchases until after closing. The last thing you want is to know you could have purchased your dream home if you had waited just a few more days until after the closing to make a large purchase. If you must make a large purchase before closing, ask your mortgage provider how it will affect your loan.
Finding the right seller and making an offer.
You found your dream home, you viewed the entire property and everything seems great – so now what? It’s time to make an offer. But before you make an offer, find out what similar homes in the area selling for.
Every seller is selling for a reason. Some sell because they have outgrown their home or have financial problems, new career opportunities, and so on. Sometimes if you can help the buyer, they may accept a lower offer in exchange. For instance, if the seller needs to sell quickly due to a new career opportunity, then he or she may be willing to sell for a lower price if you are able to close quickly.
When given the opportunity to meet with sellers, ask them why they are selling. The reasons could work to your advantage, or you may find out something that could change your opinion of the home.
There are sellers you should avoid. Not every seller is as motivated as they seem. Here are some problems to watch out for when dealing with sellers:
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They keep putting off getting their home appraised or inspected
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They are unable to clear up liens against their property
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They do not own 100% of the property
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They are uncertain about their move-out date
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They don’t have a replacement property or back-up plan
It is impossible to find the perfect seller. But it is possible to find out which sellers are legitimate, and which ones are not.
Today's mortgage options
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30-year fixed-rate mortgage
30 year loans offer a predictable monthly payment and protection from interest rate increases. However, to take advantage of falling rates, you must refinance and pay closing costs and other fees.
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15-year fixed-rate mortgage
15 year loans may offer a lower rate than a 30-year loan and you’ll build equity faster, cut overall interest costs and own you home free and clear in only 15 years.
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Adjustable-rate mortgage (ARM)
An ARM will most likely offer a lower initial rate than a fixed-rate loan. The rate can fluctuate up or down, but many ARMs have rate cap limits on increases. The option of converting an ARM to a fixed-rate mortgage is currently available with some lenders. The convertible ARM allows the borrower to lock in the interest rate and predictable payment for a smaller fee than what would normally be charged to refinance.
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Graduated payment mortgage
Graduated payment mortgages are designed for buyers with the potential of future income growth. Monthly payments start low and increase over the 15–30 year term.
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Bi-weekly mortgage
Bi-weekly mortgages allow you to pay off your loan quickly. By making 26 bi-weekly payments per year, you save on interest and build equity faster.
How important is it to get an inspection?
As a buyer, you need to know exactly what you are buying. Take into consideration that what the seller or the listing agent tells you might not be true or not the whole truth. It is important that you hire a professional home inspector to inspect the home. It is something you MUST do, whether you are buying an existing home or a new one. An inspection gives you the opportunity to have an expert look closely at the property and provide both an oral and written opinion about the condition of the property.
Beforehand, make sure the inspection will be done by a professional organization such as a local trade organization or a national trade organization. You should never skip an inspection, and if possible you should go along with the inspector during the inspection. This gives you a chance to ask questions about the property and get answers immediately. Most good inspectors will explain things that they notice as they go through the inspection. These oral comments can be more revealing and detailed than the written report. Once the inspection is complete, make sure to review the inspection report carefully.
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