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How Much is Too Much When Determining Your Maximum Buying Price?
How Much is Too Much When Determining Your Maximum Buying Price?
A lot of thought and planning goes into determining the price range a person should look in when buying a home. A lot of people set a range with a minimum and maximum – the minimum being a base for expectations and the maximum capping him financially. Even still, having a maximum buying price does not mean you have to push it to the limit.
Assessing Your Income
The general rule of thumb is to follow the industry-wide standard for payment-to-income ratio. The amount you spend on your home each month is the total sum of the actual mortgage payment, property taxes, homeowners insurance, and any other applicable fees like mortgage insurance or homeowner’s association fees. That total should not equal more than 25 – 33% of your total household income.
Your income isn’t the only thing you need to take into consideration, too. You need to seriously assess your outstanding debts as well. Outstanding debt will make it more difficult for you to qualify for a mortgage, and that’s even more reason to lean more towards the 25% (or less) than the 33%. You’ll want to make sure you have enough money for your housing and your debts, no matter what emergency situations may arise. A good mortgage lender will apply a debt-to-income ratio and will not allow you to have a housing payment that is higher than your debt obligations.
Assessing Stability
The highest possible limit for a mortgage represents what you can afford in the best of times. Life isn’t perfect, though, and surprises do come along. Think about whether or not you’d be able to make your mortgage payments if you were in an accident or if you lost your job. What if your mortgage and bills had to be paid on one income instead of two (if you’re married and sharing debts with a spouse)?
Use a Mortgage Calculator
There are dozens of great mortgage calculators online. Take advantage of one – or even more than one – to assess your financial situation. Use this information before, during, and after the loan approval process.
At the end of the day, everyone wants to see you in the nicest home you can afford – realistically afford, that is. Take your time, have a real conversation with your real estate agent about your wants and needs, and remain realistic about your ability to pay for your dream home.
That’s Not Fair! How to Determine a Realistic Asking Price for Your Home
That’s Not Fair! How to Determine a Realistic Asking Price for Your Home
Determining the asking price for a home has to be one of the most difficult parts of the selling process. You’ve spent weeks, maybe months, preparing your home for sale – making repairs and upgrades – and you want to get the best price possible. The asking price of any home is influenced by a number of factors, though, and many are completely out of your control.
Do Your Homework
There are a lot of websites you can use to estimate what your home’s sale price may be. Zestimate (from Zillow) and dozens of others will assess the neighborhood, age of the home, size, and other factors to give you a figure to start with. A lot of these tools won’t take upgrades you have made to the home into account, so you may need to make some adjustments.
Make Necessary Adjustments
Don’t get your hopes up if you think the price you’ve come up with is really good compared to the homes that have sold recently in your area. You really want to be within 10% of the most recent sales nearby to be considered in the correct ballpark; and that’s still not necessarily going to be the best price for your home.
A few things you’re going to need to consider include supply and demand, or how many homes are available for sale in your area. The more there is to see, the more competitive your price will need to be. If interest rates are trending high, you may find a smaller pool of potential buyers, so you’ll need to appeal to them. The season even makes a difference. People love to move in the spring, so you may get a higher asking price; but in the winter? Forget it. You’ll either find a buyer who is desperate or wait until spring rolls around again unless you adjust your price.
Talk to Your Real Estate Agent
One of your agent’s primary jobs is to help you set a realistic price point for your home. The financial market, the housing market, and the mindset of the buyer are all things that need to be taken into consideration. Your real estate agent will do her best to help you to set a fair asking price that will move you quickly towards a final sale.
