There are few things more thrilling in an adult’s life than buying a new home, but at the same time, it can also be stressful. For as thrilling as it can be to view dream homes in person and imagine yourself moving on up in the world with a new property, once the reality of paying for that dream home sets in, it can be easy to feel a little overwhelmed.
If you are looking into taking out a mortgage loan with DC Lending for your next home, consider following budgeting tips to make sure you end up in a house that works for your income, and you don’t get your heart set on houses you can’t afford.
Figure Your Total Take-Home Pay (Monthly Income Before Taxes)
The first step is taking stock of your income and, if applicable, your spouse’s or partner’s income. Every number that follows is one based on this initial figure. If you are paid a fixed salary or are paid a fixed hourly wage with a fixed number of hours, your gross monthly income should be easy to calculate. If you are paid a variable hourly wage and don’t have a set number or hours, are paid commissions or bonuses, or are self employed, your income is considered variable. It is best to ask your Loan Officer to calculate your variable income for you based on the way an underwriter will calculate it for your home loan.
Make a Budget of Monthly and Yearly Expenses
Once you know your income, list out all your monthly and annual expenses to see how much you’re spending each month on bills. This is a good exercise anyway, but it’s especially important to see how much of your monthly income will be left over for housing.
Each loan type has a different debt to income ratio cap. Your Loan Officer can suggest the best loan types for you based on this debt to income calculation and many other factors.
Don’t Forget to Consider Hidden Costs of New Homes
Being a new homeowner comes with all sorts of new expenses. If it’s a larger home, utilities almost certainly will cost more. You may also need to be prepared to go from a renter’s insurance policy to a full homeowner’s insurance policy. There could be HOA fees, property taxes, and even big repairs that require a larger investment than what you may have been accustomed to.
Look Up Mortgage Rates and Use a Mortgage Calculator
Once you think you have a general sense of how much money you can spend per month on a home, use our reliable mortgage calculator to play with the numbers to see what range of potential homes you may be able to afford. Interest rates change daily, so ask your Loan Officer what the current rates are for your loan type and see what a mortgage may cost with today’s pricing.
Set a Limit for How Much House You Can Afford
Your Loan Officer can also give you a final house price number that you can apply to your home search. Obviously, you can always go lower than that number, so you don’t end up being “house poor”. You also don’t want to waste time and energy looking at a home you can’t afford. Be smart about this purchase because it is one of the most important ones you’ll ever make!
Connect with an Expert Loan Officer
At DC Lending, we work hard to streamline the mortgage process for you. We can offer you a quick quote via our online form–expect an answer within 24 hours from one of our qualified loan officers! You can also apply for a mortgage online and become pre-approved before meeting your realtor. Do you have questions about the application or our company? Contact us online, call (360) 215 – 7684, or stop by our Vancouver, WA office. Our friendly and experienced team is here to support you during the home purchasing process.
