This is the most important step to buying your home. It is crucial that you do the proper analysis to decide how much you will be able to afford. Start to budget if you haven’t done so already. Reviewing your personal budget prior to meeting with your lender will allow you to know ahead of time what you can afford and will help you feel informed and educated going into the home buying process.
To Find Out How Much You Can Afford:
Track your income and expenses by utilizing spreadsheets, web-based programs or by purchasing a budget tracking software.
- Utilize our Home Affordability Calculator. Simply input your income, monthly debt, and down payment to estimate the mortgage amount that works with your budget.
- Decide which of your monthly expenses are fixed expenses and discretionary.
- Determine your debt-to-income ratio.
- Start saving for the down payment and look into various government resources or family assistance.
- Review your credit history/credit score through one of the credit bureaus. Credit scores range from 380 to 830.
- Work to repair credit, if necessary:
- Check credit report for accuracy and dispute any errors.
- Address past due accounts and work with debt collectors to help repair collection accounts.
- Work to pay down credit card balances.
- Obtain new credit if you need to reestablish good credit history.
- Make payments on time for credit cards and loans.
- Utilize a consumer credit repair service for any additional assistance.
INSIDER TIP: A lender typically determines how much money to loan you based on your income versus expenses as well as your credit report.