How much can you afford? - Landmark Mortgage

Imagine you have just completed a search that included hundreds of hours of looking at the exteriors and interiors of houses. You have sized up siding, reviewed roofing and perused the petunias. And finally, you have found the house of your dreams. Now imagine that this house of your dreams costs much more than you can afford.

If you are house hunting and have not done an important piece of homework, you could be in for this kind of heartbreak. The first thing you need to know when shopping for a home is how much you can spend.

A general rule is that you can purchase a house valued at twice your annual income, but this does not take into account your debts, a large down payment, or other factors which can add to or detract from the amount you can afford.

The purpose of this page is to help give you a more specific idea of what priced house you can afford. It will address what you are worth and what you owe on a regular basis (your assets and liabilities) and what costs you would most likely encounter once you bought your new house. In general, you will be examining the same things a lender looks at when deciding how large a mortgage you can afford.

Can I Buy This House?

Lenders and Realtors will not tell you how much house you can afford. Instead they will calculate how much they believe an institution will loan you. This is two totally different amounts. A lender wants to loan you the maximum loan it feels you will repay. It is up to you to decide how much house you can afford. Only you know what future plans you have for children, retirement, and employment. Even the most affluent among us can get into trouble if they purchase more home then they can afford.

The first question you must ask yourself is "what can I afford to spend on a home?"

In order to answer that question, you will need to look at the costs involved in buying and owning a home.

Completing this form should save time while shopping for a home because it will narrow your choices based on costs. When you finally do talk with lenders, you will have some answers for many of their questions, speeding up your loan's processing.

It should be noted, however, that today many lenders will qualify you in advance for a mortgage, even before you begin to shop for a home. Many lenders advertise this service in the local newspaper, but contact any lender to see if this is possible.

Down Payment

Lenders expect home buyers to have enough money available to make the down payment (usually up to 20 percent of the asking price for the house) and to pay their share of the closing costs ( 3 percent to 6 percent of the loan amount). You should figure this amount (which will depend on what you decide you can afford) into your home buying budget. The down payment and closing costs are usually made up of money drawn from your total assets.

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