How Much House Can I Afford?
When it comes time to choose one of the new homes for sale in Lakeville MN, it is important to fully understand your financials and the costs involved in purchasing a home. There’s more to it than just the asking price. Understanding the up-front costs ranging from mortgage application fees to closing costs, as well as the long-term costs of owning a home, will help you better judge just how much you can afford.
As a general rule, your mortgage should account for no more than 28% of your income, and if you have extra costs such as recurring health costs or school tuition, you will need to factor those in, as well. Once you have an idea of just how much you can comfortably afford to pay each month, you need to start thinking about the additional costs that go into purchasing and maintaining a home.
There are some costs that will have to be paid up front, before you even finalize your new home purchase. Mortgage application fees can range from a flat fee to 1-2% of the total purchase price. Earnest money is the first deposit paid to the seller when your offer is accepted. Particularly if you are up against other offers, this good-faith deposit can help the seller feel more comfortable in taking your offer. You should also have a down payment, as the more you put down, the better your mortgage rate.
Once you are ready to finalize the purchase of your new home, you need to be prepared for the closing costs. Typically, they range from two to four percent of the final loan amount. Often, the closing costs can be rolled into the mortgage loan payments. Among the things you are paying for in closing costs are mortgage points, attorney’s fees, inspections, title search and insurance, your escrow deposit and city recording fees. Fortunately, the closing costs can typically be estimated by the lender to give you a clear idea of how much you will be paying.
Once you’ve purchased one of the new homes in Lakeville MN, there are certain costs you will have to pay, even on a brand new home. Home insurance, utilities, and property taxes are part of the regular costs of home ownership, as are the repairs that will eventually need to be done.
Fortunately, there are a number of online calculators available through home selling and lender sites that can help you get a better understanding of what your costs could be and should be. By using these — as well as making sure you have savings and a good credit score — you can determine just how much house you can comfortably afford.