Buyer’s guide

How Much Home Can I Afford?

The first step from dreaming to buying is deciding exactly how much you can comfortably afford to spend each month. If you spend too much, you could end up having a lovely but empty home that you can’t enjoy. If you spend too little, you could end up with something that doesn’t meet your needs and that could require costly additions or another move to find your heart’s desire. By fully understanding your financial picture and the costs of owning a house, you can make an educated decision about what are actual necessities and which of your “wants” get to make the list to find the best home possible.

The amount you can borrow and your monthly payment will be contingent on several things, including the size of your income, down payment, your credit history, the interest rate and the lender.

During our Home Buying Consultation we’ll walk you through the steps from understanding your needs and finances to closing your new home.You’ll receive a complimentary “Things To Consider When Buying” brochure and a comprehensive Step By Step Guide to the Home Buying Process.

Get a Pre-Approval

While knowing how much you can afford is the first step, sellers will be much more receptive to potential buyers who have been pre-approved. You’ll also avoid being disappointed when going after homes that are out of your price range. With Pre-Approval, the buyer actually applies for a mortgage and receives a Pre-Approval letter in writing from a lender. This way, assuming the home you’re interested in is at or under the amount you are pre-qualified for, the seller knows immediately that you are a serious buyer for that property.

Why you should get a Pre-Approval?

Some buyers may be thinking that the right time to get pre-approved is right when you find the home you want to buy. But getting a pre-approval letter at the beginning of your home search during your Buyer Consultation has many advantages.

  • You’ll know at the start what kind of loan you will be approved for. This will help set your price range to search for properties. You can also get pre-approval from more than onelenders. Use the pre-approval process to compare rates and lenders..
  • Second, you’ll be able to move fast when you find a home that you love. Pre-approval letters are good for a specific period of time, usually 60 to 90 days. Getting pre-approved early can help you be ready to send in an offer ASAP because you won’t have to wait a couple of days for the lender to issue you a pre-approval letter.

Getting a Pre-approval indicate to everyone including the sellers, that you are serious about buying a home. In a competitive market this is particularly important. Let’s say you find a home you love and put in an offer saying you’re not pre-approved. Someone else makes an offer on the same home but they are pre-approved. Guess which offer will the seller most likely to accept? In a very hot market, sellers and agents may not even want to bother looking at your offer until you are pre-approved.

How do I get Pre-Approved?

Now that you have done your Home Buyer Consultation and prepare your home buying wish-list, of your wants and needs.

The question is how do you get a pre-approval? You’ll meet with a mortgage banker and find out how much you can afford to pay for a home.

What you’ll need

To get pre-approved you will need to provide the following documentation:

  • Your W-2 from the past two years
  • Your pay stubs for the past three months
  • Your tax returns from the past two years
  • Your checking or savings bank statements for the past three months (this will likely show your down payment funds as well)
  • Statements for all your other assets (stocks, bonds, retirement accounts) for the last two months
  • The name and phone number of your landlord (if you are renting) or your current mortgage documents
  • Your divorce decree, if applicable
  • If you are self-employed: Your business tax returns for the past two years in addition to your year-to-date profit-and-loss statement and year-to-date balance sheet
  • Your Social Security number and permission to pull a credit report.