What is the most important number to know when buying Seattle real estate?
Home affordability is the maximum home purchase price for which you qualify. This number is what you use to shop for your house. It’s what determines whether or not you can move into that brand new condo building in Belltown, or the smaller house a couple of neighborhoods over. And if your number is too low, it may help you decide to keep renting or take steps to improve it.
Home affordability usually comes down to three main factors:
- Income and assets – How much money do you have to complete the purchase of your new home? How much money do you make and how consistent is it?
- Debt – How much debt do you have? How much does that debt cost you each month? By combining the information from 1 and 2, you get your debt to income ratio which is what a lender will use to help you determine the amount you qualify for.
- Cash on hand – How much cash do you have to complete the transaction? This isn’t just the money for your down payment. It may also include cash required to pay insurance, taxes, fees, and closing costs. Lenders will also look to see how many months of reserves you have after paying your down payment and closing costs. In addition, home affordability may also be affected by the type of loan you get.
Find a quick estimate of your number?
If you want a ballpark figure for how much house you can buy, check out SmartAsset’s home affordability calculator. What is your number? Is the amount higher or lower than you expected?
Please remember that the number on the calculator is just an estimate based on what you entered. If the number is lower than you were expecting, there are steps you can take to improve it, and mortgage lenders will be happy to discuss options with you. It could be paying off some outstanding debt, saving a little more, or renting for a while. Whatever your home affordability is, know that with a little patience, a little work, and a smart approach, you can improve this number.
If you have a question about getting started with the mortgage approval or home buying process, please contact us. We love to help people fulfill their dreams of homeownership and we can show you how.