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Are you a First-Time Home Buyer? Find out How Much Home you can Afford

When it comes to figuring out monthly payments for a home, lenders tend to stick to a rule where the payment is made up of only 28 percent of the borrower’s disposable income.  Nevertheless, being able to afford a home as a first-time home buyer has become more important than just knowing the amount that can be lent to you.



Are you a first-time home buyer? Find out how much home you can afford.


Some of the things that you need to take into consideration include:


Continuous expenditures like home repairs, home insurance, and taxes
Costs for closing including payments for escrow and any attorney fees
Fees for application and down payment costs


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Amount of Mortgage that can be Provided


The amount of a mortgage is determined by several things like the amount of your down payment, income, residency, employment, and credit score. You need to keep in mind that there may be situations where you may be able to borrow more than the amount that you need. With that, you need to be careful not to over borrow.



Required Upfront Payments


Many home loans include costs that occur prior to any monthly mortgage payments being made. These payments may involve the following:


Closing, if any
Down payments
Earnest deposit
Loan “origination” fee



Loan “Origination” Fee


The loan “origination” fee covers the initial application that you make for the mortgage and it is a one-time fee. Besides this fee, you may possibly see other fees for underwriting, pulling credit history, and any appraisals. These fees can occasionally be applied as part of closing.



Earnest Deposit


Sometimes an earnest deposit may be part of the home buying process. The earnest is a deposit made to influence a seller to sell to you. This amount can be any amount so if you know that there are multiple bids on the home that interests you, then you need to ensure that your earnest will be the highest that makes the home yours.



Down payments


It is always a good idea to get the best rates for a mortgage. The best way this can be achieved is by making significant down payments. These payments can be any amount that you can afford, but usually the minimum made is around 20% of the loan amount. You can even “buy down” the loan amount by paying the interest upfront so that your interest rate will be lower.


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Any Costs for Closing


Any costs for closing are often seen to be at least 3% of your loans total amount. The amount can easily change and can be determined by the property itself, its location, and lender. Any costs for closing may involve the following:


Home titles
County recording
Home inspection
All fees



If you are worried about what the costs for these are don’t be, because you can get an estimate from the lender at the beginning of the loan process.



Separate Expenses of the Home


Being a homeowner is a huge responsibility and involves a significant amount of obligation towards the home besides paying the mortgage every month. Other obligations may involve:


Yearly taxes
Homeowners insurance
Any renovation
Utility payments



Prior to making a commitment to home-ownership, these and any other costs need to be realized. That way no surprises accidentally pop up during the duration of your mortgage. Don’t forget, the duration of your mortgage could be between 15 and 30 years so you’ll need to make those payments for the duration.


Knowing how to build up finances and credit history prior to seeking a mortgage could give you an advantage as a first-time home buyer. It can also make you look attractive towards lenders and you may see them making you offers instead of you having to shop around.

If you have any other questions, feel free to give us a call, or learn more about us here!

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