Mortgage Basics: How much house can you afford? [Video]

My Home September 18, 2017

 

There are many things that factor into how much money you may be able to borrow, like your income, credit, size of down payment, as well as employment and residence histories.But knowing how much property you can afford often depends on more than just the amount you may be able to borrow...

It’s also helpful to consider three areas of cost when you are deciding if a house is right for you.

First, upfront costs...
These costs show up before you start making monthly mortgage payments and can include: an earnest money check, which is a deposit that is paid upon making the initial offer. Another cost is the down payment, which is made at the time of closing. Paying a higher down payment may help in the long run by decreasing your monthly mortgage payment amount.

Second, closing costs...
These typically range from 2 to 4% of your total loan amount and could, if required, include a combination of mortgage application fees (if applicable), inspections and survey fees, title insurance, recording fees, and a possible escrow deposit.

But, don’t be intimidated by the list of closing costs, they’re estimated by your mortgage lender up front and you may be able to negotiate to have some of these costs paid for by the seller.

Third, there is the ongoing cost of owning a home...
This not only includes your monthly mortgage payment, it also includes ongoing ownership expenses...things like mortgage insurance, homeowners insurance, property taxes, monthly utilities or home repairs..

So, it’s important to consider all potential future expenses up front when buying a home.

By considering these three areas of cost and working with a mortgage loan officer you can better determine how much house you may be able to afford.

To start thinking through your options, our U.S. Bank home affordability calculator can help make the path to homeownership easier to manage, giving you peace of mind.