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How much home can you afford?



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Transcript: How much home can you afford?

How much home can you comfortably afford? Now that’s an important question to answer. Because in addition to a home’s price, you also need to factor in other monthly expenses, and your lifestyle. DCU has some tips to help you figure it out.

Number one: calculate your debt to income ratio or D T I, that’s the percentage of your monthly gross income that goes to pay your monthly debts, like housing expenses, a car loan, credit cards, and other recurring obligations.

Your lender will review your D T I to help determine how large a mortgage you can afford.

You can learn more in our video: How To Calculate Debt to Income Ratio.

Number two: compare your mortgage options.

The mortgage you choose, fixed, or adjustable, as well as your term and down payment, will determine your interest rate and monthly mortgage payment.

A DCU loan officer can help you choose the right mortgage for your specific needs.

Number three: factor in Private Mortgage Insurance or P M I.

If your down payment is less than twenty percent of your property value or purchase price, whichever is lower, this cost will be added to your monthly mortgage payment. Some lenders may offer lender paid mortgage insurance options.

Number four: determine the property taxes on your home. You can ask your realtor about the estimated taxes, check online listings or town websites.

It’s a significant cost, but the good news is property taxes may be tax deductible. Consult your tax professional.

Number five: estimate the costs of your electricity, gas, oil, and water and factor these into your monthly budget.

Number six: if you’re moving into a condominium, or neighborhood with a Homeowners Association, be sure to include those fees in your monthly housing expenses.

Number seven: you’ll also need to factor in closing costs and other pre-paid items like mortgage application fees, attorney fees, inspection fees, interest, and property tax escrow.

Number eight: and finally, be sure to plan for the estimated cost of any immediate repairs or renovations you’re planning. Be realistic about the improvements you need to make now versus those you can make later.

So, how much home can you afford?

Calculate your debt to income ratio. Compare mortgage options. Factor in Private Mortgage Insurance if required. Determine your property taxes. Estimate monthly utilities. Include Homeowners Association Fees, if necessary.

Add immediate needed repairs and renovations. And, factor in closing costs and other pre-paid items.

DCU loan officers are always here to help you choose the home mortgage that’s right for your needs. For more information, call one eight hundred three two eight eight seven nine seven, go to DCU dot org backslash mortgage, or a DCU branch