January is almost over, which means the housing market is waking up from its holiday slumber. If a new home was one of your goals for 2016, it’s time to get ready to “watch the market”. You don’t actually need to watch it, if you call us, we’ll do that for you. But, before we begin our search, you need to know what you can realistically afford.
Consider Your Salary
A very rough way to estimate how much you can afford is to look at your salary. One way to look at it is by your monthly payment. Your monthly mortgage should not exceed one week’s salary. Harrine Freeman, a financial expert, says you can estimate the price of home you can afford by tripling your yearly salary. That would be the HIGHEST you could afford.
A more accurate way to get an idea of what price range you should look at is using the 28/36 rule. The “28” is your monthly house payments (mortgage, insurance, & taxes). This number should not exceed 28% of your gross monthly income (income BEFORE taxes are taken out).
The “36” refers to your monthly debt-to-income ratio. Your monthly bills (credit cards, car payments, etc) should not exceed 36% of your monthly income. Once you figure out both of these numbers you can figure in a monthly mortgage payment that will keep you under these two percentages.
Talk to a Lender
The best and most accurate way to figure out what exactly you can afford when shopping for a new home is to actually go talk to a lender! They will tell you exactly what you need to get approved and ready to start house hunting! You can talk to your bank or a mortgage company. We have several lenders that we work with on a regular basis, so if you’re ready to get approved and get a price range for your new house just give us a call and we can give you several lenders’ contact information for you to get started!
Want & Needs
Everyone has their checklist of things they want in their dream home, but not everything on that list is necessarily a need. Rarely does our budget allow us to find a home with all of our wants, so you need to make a list based on priority. What is most important to you? Location? Square footage? Finishes? Amenities? Figure out where you are willing to give and what you’re willing to compromise in order to get a home. On our website (www.lynnbedford.com), you’ll find our “home finding needs” worksheet. That will help you a great deal in narrowing your wishlist. There is also a link to the same worksheet, but in Google Doc form, so that you can submit it and we can immediately begin searching for you.
Once you have an idea of price range and know what you want and need in a home, you are ready to get out and start looking at what’s on the market! We can’t wait to help you find the perfect home in 2016.