Before you start looking at homes, it’s a good idea to find a target price range that you can afford. A mortgage lender will want to make sure you can handle the down payment, plus monthly mortgage payment made up of principal, interest, taxes and insurance (PITI).
Interest rates and your personal finances will influence the amount of house you can afford. For a quick estimate of a monthly mortgage payment for which you may qualify, use a Mortgage Calculator. But remember, it’s always good to talk to a lender before you start shopping for a home. We can refer you to lenders suited to your specific financial needs.
In addition to the mortgage you borrow from a lender, normally you will be required to make a cash down payment – a percentage of the purchase price that you pay for the home. Conventional loan down payments range anywhere from 5 to 20 percent, depending on the requirements of your lender. There are also specialized loan programs that allow for as little as 3 percent down for those who qualify. A higher down payment often allows the lender to be more flexible with a loan package, including interest rates and closing costs. In addition to the down payment, you will need to have enough cash available to pay closing costs.