How Much House Can You Afford?

Now that you know what you're looking for, the next step is figuring out what type of home you can afford. A review of your income, savings, monthly expenses, and debt will be necessary.

Early on in the process, you'll want to get pre-approved for a mortgage loan, which helps determine how much you can afford. It enables you to move swiftly when you find the right home, especially when there are other interested buyers. It also indicates to the seller that you are serious and can afford to buy the property. A pre-approval is a simple calculation done by a mortgage lender that tells you the amount you'll be able to finance through a loan and what your monthly payment will be. When you find a home to buy, a pre-approval also reassures the seller that you have the financial means to purchase his or her home.

Before being approved for a home loan, lenders will check an individual's credit score. Therefore, it is important for those looking to buy a home in Las Vegas to know their credit score and check their credit history. In the United States, there are three credit bureaus which issue credit scores: TransUnion, Experian and Equifax. Credit scores can vary slightly by bureau. Individuals can check their credit history and/or FICO score with one or all three credit bureaus through sites like Experian, TransUnion and Equifax.  You are entitled to a free credit report every 12 months from all three at www.annualcreditreport.com

Knowing what you can afford is the first rule of home buying, and that depends on how much income and how much debt you have.

The price you can afford to pay for a home will depend on several factors, such as:

  • gross income
  • the funds you have available for the down payment, closing costs and cash reserves required by the lender
  • your debt
  • your credit history
  • the type of mortgage you select
  • current interest rates

Another figure lenders use to evaluate how much you can afford is the housing expense-to-income ratio. It is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your new home loan, property taxes and hazard insurance (also known as PITI).  Keep in mind that the fees and costs associated with owning a home has tax benefits not available to renters. 

Each buyer is unique and a mortgage professional can help you find out just what you can afford. Your income and your debts will typically play the biggest roles in determining your price range. It's simple to make an estimate, just run the numbers for yourself using our Affordability Calculator and Rent Vs. Buy Calculator.  Compare Mortgage Rates

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Linda Strasberg, All Rights Reserved

Las Vegas Realtor, Get Pre-Qualified, Get Pre-Approved, Find Homes for Sale In Las Vegas

 

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