How Much House Can I Afford?

August 2, 2022

Most folks don’t have the luxury of making an all-cash offer on a home, which is why a mortgage is a vital part of buying a home. Without employing vital tools and knowledge from experienced mortgage lenders,, it can be difficult to wrap your head around what you can afford. Handy tools like an online mortgage calculator can help you get a better sense of what you can expect to dish out monthly, considering the home purchase price, your down payment, interest rate and other expenses, but as a general rule, those calculators are limited and rely on assumptions. In this article, we’ll help you figure out what you’ll need to have ready so you can plug in the numbers and get the most accurate picture of affordability. 

Phoenix Median Home Price

Before we dive into mortgage calculators, let’s first help you get a grasp on what’s happening in the Phoenix housing market. What was an insanely competitive seller’s market is now cooling and shifting to a buyer’s market. That means there’s far more inventory and home sales prices are going down, which benefits you as a buyer. The analysts at The Cromford Report state that as of July 21st, the median price for a single-family home in the Phoenix Metro is $460,000 compared to $475,000 the month prior. So right now could be your time to buy!!

Use An Online Mortgage Calculator 

Luckily there are plenty of online mortgage calculators with built-in formulas that can help you ballpark how much you can afford to spend on a home. Here are some of the general financial factors you’ll want to jot down in advance to plug into a mortgage calculator:

Yearly household income (before taxes) 

As a general rule of thumb, financial advisors recommend that your mortgage payment should be only 28-30% of your monthly household income. 

Monthly debts

Write down all of your monthly debts and expenses. Think through your credit card and loan payments. Also, don’t forget to factor in what debts you may have coming up including college tuition, new baby expenses, major surgeries or medical expenses. 

Down payment 

The average down payment on a house isn’t necessarily a whopping 20% like it used to be. Now, the average is 12% down. Keep in mind though that the more you put down, the lower your monthly mortgage will be. Additionally, if you put 20% down, you’ll avoid paying mortgage insurance. That being written, your best bet to decide how much money to put down is to discuss options and scenarios with a professional mortgage banker. 

Loan type 

Think through what type of loan is going to work the best for your financial situation. For most homeowners, a 30-year or 15-year fixed-rate mortgage is the most common, but other options, such as adjustable rate mortgages are available for specific situations and durations.

Mortgage interest rate 

As of July 23rd, the rate on the 30-year fixed mortgage increased to 5.54% from 5.51% the week prior. Interestingly, the Fed’s recent 75 basis point hike resulted in a slight downturn in rates as the commentary thereafter from the Fed indicated positive movement regarding inflation. Read our recent blog post for tips on how you can still afford your dream home, even with increasing mortgage rates.

Home Insurance 

You’ll need to talk to a lender to figure out how much you’ll likely owe in homeowner’s insurance. The cost of home insurance varies according to factors such as location, condition of the property and the coverage amount. 

HOA dues (if any) 

Being part of an HOA comes with its own fees, so you want to factor those into your projected budget too. 

So, with all that in mind, let’s go with the median Phoenix price home we mentioned earlier at $460,000, a 12% down payment of $55,200, a 5.54% interest rate, and a 30 year fixed mortgage. Plug that into an online mortgage calculator, and you’ll need to earn about $98,939 per year before taxes, either individually or combined to buy a home.

Connect With A Lender For Competitive Rates and Strategy

If you want to get the best deal and a true sense of what you can afford, you’ll need to shop around and compare rates with multiple lenders. Your best bet to ensure success through the home buying process is to connect with trusted mortgage advisors as shopping for the lowest rate online often comes at the sacrifice of service and strategy.  Buying the lowest rate could actually cost you more money or put you in a worse financial position than if you had built an appropriate mortgage strategy with an expert lender. Service and strategy plus a competition rate is what you should be after.    

To vie for customers, lenders set their own fees and rates and are open to negotiating – after all – they want your business. Because rates fluctuate daily, you want to partner with a lender who provides you with a strategic approach and a high level of service, not just the lowest rate on that day.. 

Last, do not rely solely on the phone for communication. Make sure you receive your quotes in writing via email as you can share the fee structure with multiple lender partners to see who is truly giving you the best combination of rate, service and strategy. Let us know if you need any recommendations for lenders, and we’ll point you in the direction of our trusted lender partners who we have worked with for years.

Find Your Dream Home With Halpern Residential

As you can see, there’s a lot of number crunching that goes into the home buying process. Though you need to do your due diligence on the front end to get a grasp of your financial state, the expertise at your disposal at Halpern Residential can help you make sense of it all. We’re in your corner and can connect you to our wide network of lenders, home inspectors, attorneys and related professionals that can help guide you along the way. Contact us and we’ll help you along the home buying journey in one of the best places to live in America.

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