Meeting with a mortgage lender will help you answer the question “how much house can I afford?” The lender will evaluate your overall financial state, including income, debts, and assets, and determine whether you qualify for a loan and at what rate.
Your assets would include how much you have saved up for a down payment. Most conventional mortgages require a 20% down payment, or $60,000 for a $300,000 home. It may take a long time to save up that much money, and it’s a scary thought to put that all down at once. Luckily, there are low- and no-money down options available when buying a home.
The Federal Housing Administration (FHA) insures a portion of the balance with your mortgage lender, meaning you can put down as little as 3.5%.
Fannie Mae and Freddie Mac are two other government-sponsored companies that can help you secure a 3% down payment on your home loan.
If you’re a member of the U.S. military or live in a rural area, the Department of Veterans Affairs and the Department of Agriculture’s Rural Development program have no money down options available for qualifying members. When you meet with a mortgage lender, make sure you ask about the different loan options you may qualify for.
A common misconception of first-time home buyers is that mortgage lenders are one-size-fits-all. In reality, you should shop around to several different mortgage providers, to see who can offer you the best interest rate.
When determining how much home you can afford, it’s important to take into account all of the costs associated with home ownership: costs such as maintenance, property taxes, and homeowner’s insurance. InsuranceGeek.com offers free home insurance quotes, so you can have an idea of what you’ll be paying once you purchase the home.