How Much Home Can I Really Afford?

You’ve probably already heard that before you start your search for your first home you should establish how much you can afford to spend.  But many potential home buyers don’t know where to start to figure this out.

1)    Compute your Debt-To-Income Ratio: Many lenders use your DTI to figure out how much they are willing to let you borrow.  Contact a mortgage professional to get pre-approved and find out what a lender is willing to lend you.  The Lender will tell you the limitations of varying loans and the maximum DTI allowed.   

2)   Just because you qualify for a certain amount doesn’t mean you can actually afford that amount.  You need to examine your expenses and lifestyle to see whether you can and are willing to pay the mortgage month after month.  Think about what other major expenses you are responsible for, i.e. auto repair bills, educational costs, high medical expenses, child care, etc. and factor these in to what you want to borrow.

3)   The Loan Amount isn’t the only monthly payment you need to consider.  While it is extremely important to figure out what your monthly principle and interest payment is to the lender, you will also need to factor in monthly amounts for property taxes, home owners insurance, mortgage insurance, and home owners association dues.  Also find out what average utility costs are in the area you are considering.  Add all of these costs to the monthly mortgage payment to figure out what your total fixed housing expenses will be. 

4)   Stuff happens! Don’t put all of your earned money into your mortgage.  Plan on having several months’ worth of income put away in your savings account just for emergencies.  You should allow for money towards start up costs.  Inevitably, when you move into your new home you’ll be spending money on paint, new furniture, window treatments, new tools, and equipment.  These things should be factored into your housing plan.

5)   Think down the road.  What’s in your future?  Are you considering growing the family a bit? Is college in your plans? What other major expenses are you considering?  Take into consideration unforeseen events such as job loss or health challenges.  Having thought through these may result in a more conservative approach to buying your first home.

At Atlanta Housing Source, we want to be your source for real estate. Whether you live in Gwinnett, Cobb, North Fulton, or Forsyth, we strive to exceed your expectations in your real estate needs.  Please email us at for more information or call Mark Lackey at 404-886-8789.

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