First Time Home Buyers - Step 3

Now that you know how much you make, what kind of debt you have, and how much of a mortgage payment you can afford what do you do now? Well this is where the fun all begins.

It is at about this point in my interviews with my customers that I start having to hold my grin back because I start getting overly excited knowing that I am going to tell the people in front of me just how much of a home they can afford...usually it's a lot more then they could have imagined! (I love my job!!)

So here it is, the calculation you have all been waiting for......how much of a home can you afford?

Before we start I need you to do a few things......Find a spot that is comfortable for you to be in, turn off your TV or radio, eliminate all distractions because this is the most difficult part of calculations and your head might start to hurt.

OK now that I have given that small disclamer let's get started.

1st look around the web and find out where interest rates are, you can look at my web page if you would like,>My Web Page.
Once you've found out what rates are like you can start. I'm going to use 5.5% for my examples.

With an interest rate of 5.5% you will be paying roughly $5.5 per 1,000.00 you buy. So how does this help you? Well if you followed step 2 and figured out how much of a mortgage payment you can afford you are going to enter this into an equation, follow this:

$5.5 Your Allowed Mortgage Payment
$1,000.00 X (UNKNOWN AMOUNT)

Now for those of you that aren't math geeks like myself there is a really easy way to find out what the unknown amount is:

It's call cross multiplying!
1000 * Your allowed Mortgage Payment (for example let's say 800) / 5.5 = Unknown Amount

1000 * 800 = 800,000.00
800,000 / 5.5 = 145,454.55

The 145,454.55 is how much of a mortgage you can afford! Yes that's right if you can afford a house payment of 800 then you can afford a loan amount of roughly 145,454.55. Now, remember back in step 1 when I had you write down how much you had saved up and how much you wanted to use as a down payment? You are going to use this to find out how much the purchase price needs to be.

If you write down that you want to put down $10,000.00 then that means that your purchase price would be 155,454.55 you simply add that to the loan amount. Now, before you go running off to find a home you need to know a few things about loan products and down payments. Continue on to step 4 for this.

Congradulations on completing step 3!

To apply for a loan visit My web page