How Much Mortgage Can I Afford?

The prospect of buying your first home is exciting, but it can be overwhelming, too, especially in a competitive market. The first step is to understand what you can afford and set a realistic budget to guide your search. As experts in real estate on Staten Island, New York, and in the surrounding area, the team at Salmon Real Estate provides information about mortgages to help you decide what you can afford. Learn more about how to calculate mortgage payments and determine what you can afford.

Understanding Mortgage Affordability

If you’re wondering, “How much mortgage can I afford?” – you’re not alone. Whether you’re currently renting or you’ve been in your current house for a few years, you should take the time to go over your finances before beginning your search.

A good rule of thumb is that you shouldn’t spend more than 28% of your gross monthly income on housing, and no more than 36% on total debt – that includes your mortgage, car payments, credit card bills, and any other forms of debt. This is called the 28/36 rule, and when you work with a bank or credit union to get pre-approved for a mortgage, they may use similar guidelines to decide how much money they're willing to lend you.

You’ll also want to consider how much you can afford versus how much you’re comfortable paying. You may have the financial flexibility to put $3,500 towards your mortgage payment each month. However, if you’re trying to save up for another major purchase, such as a new car, it may be better to look for a smaller home that offers a lower monthly payment. Keep in mind that you’ll need to factor in other costs to determine how much you can afford, including:

• Closing costs
• Homeowner’s insurance
• Property taxes

If you buy in a neighborhood that has a homeowners association (HOA), you’ll have to budget for HOA fees, as well.

Calculating Your Monthly Payment

To make it easy for buyers, Salmon Real Estate offers a free mortgage calculator. This easy-to-use tool helps you understand what your monthly payment would look like for any given listing. To use the calculator, simply enter the following information:

• Home price: This is the listing price of the home.
• Down payment: This is the amount in cash that you’ll pay upfront for the home. 20% is a good rule of thumb, but your lender may allow a smaller amount.
• Loan term: This is the amount of time you have to repay your mortgage loan. Often, mortgage terms are 15, 20, or 30 years.
• Interest rate: This is the cost you pay each year to borrow money from a lender. Your monthly payment will combine interest and principal payments.

For example, imagine you’re looking at a $450,000 home and you’re planning on a down payment of 10%, or $45,000. On a 30-year fixed mortgage with a 7% interest rate, your monthly payment would be $2,694. If you could increase your down payment to 20%, or $90,000, your payments would decrease by $300 each month, to $2,395.

Start Your Home Search with Salmon Real Estate

To help you navigate today’s housing market, turn to the experienced professionals at Salmon Real Estate. As one of the oldest independently owned real estate companies on Staten Island, NY, we know the area inside and out. Our team works with both buyers and sellers in residential and commercial real estate. We take a hands-on approach with each client, getting to know your needs so we can customize our search and only send you listings that will be a good fit. To learn more about Salmon Real Estate or get in touch with a member of our team, contact us today or review the new buyer’s guide.