Coldwell Banker Burnet
licensed MN Broker
But then, what it you have a substantial downpayment?
The best and first thing you should do is speak to a lender who can guide you in determining the answers for yourself
1. How much you can afford to buy
2. How much you are comfortable spending
3. How much would you have left if you factor in your other debts, costs of maintaining a lifestyle
4. What kind of loans can you qualify for --- VA loans means no down payment may be required; FHA means you may need to put only 3.5% down, etc.
If you already have a realtor, your realtor can give you referrals to lenders who can help.
that is such a great question. Unfortunately, you are the only one that can answer that question. There is a huge difference between "afford" and "approved amount." Maybe if more people asked this question we would have fewer foreclosures.
The lender will first "pre-qualify" you then after loan application and document submission a "pre-approval subject to the home and it's condition will be provided. It tends to be around 28% of your combined income however there are many other factors such as debt to equity ratio (how much consumer debt you already have on the books) and credit score. That is not what you can afford.
The best advice I can give you is this.... search for a budget worksheet online. You will find some free ones that allow you to itemize your current and expected future expenses. Basically your income falls into disposable and discretionary income. Meaning, After taxes, you have disposable income that can be used to pay for a savings, retirement, medical, mortgage, tithing (if you are charitable) car payment, education/tuition, and utilities. Then what is left is discretionary ie dry cleaning, dining out, vacation funds, Christmas budget, and anything else that has a lower priority.
You may have heard the term "house poor" before, meaning that you have so much of your income tied into your home that it becomes a burden on your life, or causes consumer debt which is a bad way to go. This is the biggest mistake that first time home buyers make.
Find a great Realtor, talk to a mortgage lender, work out a current and 5-10 year future budget (kids?). That my friend is what you can afford. I hope this helps.
Broker - Owner
Green Home Realty
RE/MAX Sun & Sea