So, it’s time for your family to purchase a new home, Congratulations! Building a new home is an exciting time for families to make decisions and create a space to build memories in for years to come. The first step into this journey is determining your budget. Calculating how much home you can afford is not an exact science, because every financial picture is unique, but there are tools to help you make a smart investment.
In general, you need to take into consideration a few main items: primarily, your total household income, your total monthly debt, and how much you have available to make a down payment. Things like student loan payments, car payments, and medical bill payments should be factored into your debt calculation. A larger down payment means you can pay more upfront and will have to borrow less, which usually leads to being able to buy a higher-priced home.
Your home payment should not exceed approximately 30 percent of your total gross income. That being said, it’s important to consider what you, personally, are comfortable with. Some aspiring homeowners may have stable income, but not the amount of savings they’d like to make a down payment and still leave a ‘cushion’ in their bank account. How much you can afford on a new home depends on how much you want to have in your savings account for an unexpected emergency, as well as any future large expenditures (a new car, going back to school, funding a child’s education, or caring for an aging loved one, perhaps) that may arise.
Most financial advisors will recommend having at least three months of housing payments, including all your other monthly expenses, in savings, just in case. That gives you a nice buffer should something unexpected come up.
Another thing to consider? What kind of home you’re buying. A brand new home may be more expensive initially, but it will result in far fewer maintenance and improvement issues, especially for the first several years, while an older home will likely have some issues that need addressing — and that costs money.
Once you know how much home you can afford, you can hone in on the floorplans and styles that fit your family’s budget! Whatever you decide, Consort Homes is sure to have a financing arrangement and floorplan to fit your unique needs.