“How Much House Can I Afford?” One of the first questions that a home buyer asks is, “How much house can I afford to buy?” It’s best if this important question is answered from the very beginning of the home buying process. That’s why we refer a home buyer to one of our preferred lenders before we even take them out to look at homes. Knowing how much you can afford in a monthly payment is very important before you start looking. If you take the time to find out what your loan limits will be, you save yourself from several negative experiences: Wasting time, looking in a price range that you won’t be able to afford. Building up false expectations. It can be discouraging to paint a picture of your new life in a particular home or neighborhood, and then have it crushed by the reality that your dream is out of reach for now. Falling in love with the wrong house. Let’s face it, buying a home is an emotional decision as well as a logical, rational one. It’s best to get all of the rational calculations and plans squared away before you let your emotions kick in to the decision. You do much better when you “fall in love” with a house that you can afford. How Much House Can I Afford?The very best ratio, according to most lenders, to have is roughly one-fourth of your income gong towards house payments. Net, or take-home income. Anywhere between 25% and 32% is safe, but it’s good to start with conservative numbers. That way, if you start looking and find that you want to stretch yourself to a number above 25%, you can. If you start looking at the top of your range, you limit your upward movement. [Consult a Lender about "front-end and back-end ratios"...we can refer you to some excellent Frederick Lenders.] Remember, getting a pre-qualification from a local lender is the only way to know for sure what loan amount you can qualify for. Doing your own calculations is only useful for getting a general estimation. Learn more about “The Difference Between Pre-Approval and Pre-Qualification” from my fellow real estate blogger, Bill Gassett, Massachusetts Realtor. Conservative or Not? With a conservative 25% – 28% of your take-home income going towards your mortgage, you insulate yourself from emergencies. Even with the loss of one income, it is manageable to keep your home. On the other hand, if you expect to have upward movement in your income, stretching yourself to your maximum loan limit is not necessarily a bad strategy. You may find that going the ultra-conservative route leaves you having to live in less than you really want. Either way, some buyers who make a hasty decision experience what we call Buyer’s Remorse. For some great advice on “How to Avoid Buyer’s Remorse” read this article by my friend and fellow real estate agent in Las Vegas, Debbie Drummond. Whether you make a conservative decision or not, having sound financial advice is our strong recommendation, whether through a cert

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15. How Much House Can I Afford to Buy?
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