How Much House Can You Afford?
Buying a home can be a complicated process,
especially if this is your first home. One of the
most confusing and important aspects is the costs of
buying a new home. How do you determine what you can
afford?
If you’re working with a REALTOR®, he or she can
guide you through this step. Determining how much
you can afford to buy depends on three factors:
- Down payments – Down payments are
typically 10% to 20% of the cost of the home.
Government-backed loans, such as FHA or VA
loans, usually require 5% or less. Your Illinois
REALTOR may also be familiar with local or state
programs in your area that require low or no
down payment.
- Qualification - Lenders consider your
debt-to-income ratio to determine how much you
can afford. Lenders will look at your income,
assets and credit. Your Illinois REALTOR can
help you determine what price range and monthly
payment will work best for your needs. Monthly
payments will consist of the principal,
interest, taxes and insurance.
- Closing costs - The buyer and seller
may each pay fees at closing. Your Illinois
REALTOR can help estimate what your cost will
be. It could include fees such as appraisal,
survey, inspections, hazard insurance, loan
origination, credit reports, document
preparation, title search and insurance,
recording fees, notary, attorney and escrow.
Points (interest collected in advance by the
lender) may also be included in the closing
costs.
Learn more about
mortgages and financing. |
