You are shopping for a home and you find some great locations that you want to pursue further. Now that you are past the real fun part, it is time to do some of the "less fun" stuff. Before you start shopping for a mortgage, or even looking at homes, it is best to figure out how much you can afford for a mortgage.
Why should you figure this info out yourself?
There are two reasons why you should figure this information out and why do it yourself.
The first reason is because it does not make sense to look at homes you will not be able to buy because they are too expensive. While looking at outrageously beautiful homes can be fun, it will only do one of two things: buy a home you can't afford or be depressed about not being able to buy it. The homes that actually exist within your price range will be less appealing and this could lead down a bad path.
The second reason is because you are able to know your financial situation better than any bank. If you want to use a tool that can help, then use a mortgage calculator since it can help you figure out a lot of details. A bank will know how much you have in accounts and various expenditures but it will not know how much you spend on gas, groceries, your child's sports, etc. Due to this, their largest offer, which they will offer you, may still be out of your price range. The bank will know about your credit cards, student loans, the components of your mortgage payment, and any other legal obligations like alimony/child support, etc.
Here is how you can figure out how much you can afford.
- Find out how much your net income is. What is your net income and the net income of other people in your home? Calculate these numbers and it will give you how much money you have to actually work with each month.
- List your monthly expenses like the bills you have to pay every month as well as the bills you pay every few months.
- List the expenses that will be added when you become a homeowner. Landscaping costs, basic upkeep, etc.
- List expenses that go away (if you are switching from renting). Also, things you will do without like eating out, etc.
- Figure out how much money you have after expenses.
- Figure out how much you can spend on a house- this is great for using a mortgage calculator.
If you can find this information out, then you will have a better experience of finding a home.