How Much House Can I Afford in 2024?
Purchasing a home is a major financial goal, however, it’s not necessarily the right decision for everyone. Before you start searching for any homes or a mortgage lender , think about the following.
Understanding Affordability
Homebuyers need to think beyond monthly payments. Always consider the down payment, closing costs, relocation costs, and any renovations upfront. This will help you determine how much house you can truly afford. How much house can you afford? Check out Tomo's Affordability Calculator .
Homeownership Commitment
Owning a home is a long-term commitment (15-30 years) with both pros and cons. While you enjoy the freedom to decorate and avoid landlord repairs, you're also on the hook for maintenance and selling can take time to see a return on investment.
Organizing Finances and Budget
It's wise to familiarize yourself with your monthly expenditure, earnings, available funds, and credit rating.
Earnings: Determine both your gross and net income for a clear picture of what you earn each month. Gross income is your total income before taking out taxes, retirement savings, and health insurance costs. Net income is what you have left after these deductions, basically the amount that ends up in your bank account each month.
Expenses: Organize your expenses into fixed and fluctuating categories. Fixed expenses are like loan payments, student loans, and car payments. Fluctuating expenses are your day-to-day expenditure like groceries, travel to work, and entertainment. Remember to include any future expenses you know about that aren’t related to owning a home, like vacations, having a baby or going back to school; and don’t count expenses that you won’t have anymore like rent.
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Budgeting a Mortgage
Smart homebuyers assess how a mortgage might fit into their budget. This is critical for grasping, “what house can I afford”. Firstly, you can start by using a basic online mortgage calculator to determine if the payments are compatible with your post-expenses income. For more in depth and personalized assessment, it’s best to consult an experienced mortgage specialist to help you craft a feasible payment strategy.
Hint: We have some great mortgage experts here at Tomo .
Down Payment Budget & Closing Costs
When considering how much house you can afford, remember that qualifying for a mortgage is different from being able to afford a home. Most lenders require a 3-5% down payment, but remember, anything below 20% will need private mortgage insurance (PMI), a critical aspect of conventional loan requirements. If you can, aim for a 20% down payment to save on interest in the long run.
Cash on Hand
After your down payment, you’ll need cash for closing costs, usually around 2-5% of your loan amount.? Closing costs include various fees such as legal, home inspection, property taxes, homeowner insurance, and more.?
Buying a home is more than just meeting conventional loan requirements, it’s about firstly assessing your financial situation and determining, “can I afford a house” and “how much of a mortgage can I afford”. Use this guide to evaluate your readiness for homeownership, and remember, Tomo is here to guide you every step of the way. Start off by checking out our Affordability Calculator .