Before you start looking for houses, you must take a look at your finances. Based on your down payment, income, debts, regular expenditures, and other key financial information, a mortgage professional can help you determine how much you can afford to pay every month and the price range that works best within your budget.
Start by creating your Net Worth Statement. Add up all of the major assets you currently own (e.g. house, rental properties, land, vehicles, investments, retirement savings, etc.) Subtract all of your existing debts (e.g. mortgages, loans, lines of credit, credit cards, other debts.) This will determine your net worth. Lenders will be more apt to lend you money if you have accumulated a good amount of equity.
Next, let’ stake into consideration how much money you have saved up for your down payment. Take a look at how much cash you have on hand. Subtract enough to cover closing costs, moving costs, anticipated renovations, decorating, and landscaping in your new home. The remaining amount is how much you could put down on the new house if you wished to use it all. The more cash you pay upfront, the less you will have to pay month by month on the mortgage, and the lower your total interest costs will be. If your down payment is less than 20% of the purchase price, you will need to purchase mortgage default insurance which is an additional cost.