Purchasing a home is likely the most significant investment you’ll ever make. It’s tough to wrap your head around how much you can afford. Isn’t that why we have mortgage preapprovals?
In reality, mortgage preapprovals are only a piece of the affordability puzzle. The information that a mortgage preapproval provides on paper might differ from what works in your situation. In other words, what you can afford and what you should spend are very different concepts.
Factors That Impact Your Mortgage Amount
It’s normal to have some anxiety about home costs. After all, even modest homes cost a lot of money! To determine if you can truly afford a particular home, consider these factors:
- Your Income
While a mortgage preapproval will tell you the mortgage amount you are eligible to receive based on your income, paperwork doesn’t always reveal the entire story. If there are rumors about pending layoffs at your job or if you’ve been considering a career change, you might want to reign in your home spending. - Your Down Payment
The more money you put down on a home, the smaller your mortgage needs to be. If you have a significant amount of on-hand cash, you might be more comfortable stretching the limits of your preapproval. - Your Other Monthly Liabilities
What do your monthly bills look like? Do you only pay the basics, like utilities, car payments, and student loans? Do you own a vacation home, a boat, or another luxury asset? The answers to these questions will affect the amount of money you can afford to spend on a home. - The Size of Your Savings Account
If your savings account is on the small side, you might err on the side of caution and spend less than your preapproval allows to keep these easy-to-access funds available for emergencies.
Contact Us Today!
If you’re wondering how much you can afford to spend on a home, it’s time to talk to the experts! Contact MortgageDepot today to start the mortgage preapproval process.
Connect with one of our loan consultants for more information.
