How Much Can I Afford?
Generally speaking, if you have good credit, a bank could qualify you for more than you need. For that reason alone it is important to understand just how much of a home you can actually afford. The dean can help you calculate what price range you should be looking at.
For starters, an important term to remember is “PITI”; – this is your monthly mortgage payment. “P I” refers to the principal and interest you pay each month. “T” refers to the monthly real estate taxes. “I”; refers to the monthly property insurance. Also, keep in mind if you purchase a condo/townhouse, the monthly maintenance fee will also be part of you monthly payment.
There are three things needed to determine what you can afford:
1. What is your target monthly payment (PITI).
2. How much money will you use as a down payment?
3. The interest rate.
We highly recommend using this process to determine the price range to shop in. Additionally, you can use the “tax advantage” to actually reduce your monthly payment OR provide you with more purchasing power.
To learn more, please read our Case Study & Tax Deductions Explained.
What is a Pre-Qualification?
A pre-qualification is issued after a mortgage provider gathers initial information from you such as income,
debt, employment, etc., and performs an initial credit check. Then a pre-qualification letter is issued to you and your Realtor. You can now go shopping!
We highly suggest that you deal with a reputable mortgage provider. Don’t be fooled by enticing low rates with fine print. An inaccurate pre-qualification can upset your life and disappoint you. A reputable company will not only issue the pre-qualification but will also issue to you a “good faith estimate.” This is mandatory by law and contains all of the fees and what it will cost you to close on the property. Unless you have these two documents, you are not ready to proceed.
CONTINUE READING Why Work With a REALTOR®
Contact Joe DeLorenzo Broker/Owner of RE/MAX IN TOWN at joe@joedhomes.com or call 609-895-0500 x107.
