Before you decide to get in the market, you'll want to determine how much home you can afford. (Surprise: it's usually more than you think.)
Current economic advantages like low mortgage rates and short sale inventory are creating a unique moment of opportunity for homebuyers. With housing affordability high as the spring buying season approaches, the key to boosting your buying power is to first make a 360 degree assessment of how much house you can afford.
There are many different mortgage calculators available for homebuyers, but sometimes just playing with the numbers doesn't tell you the whole story. To get a more meaningful view of what you can afford, you will want to give yourself a Financial Checkup to assess all factors that make you mortgage ready. This can include:
- Repairing credit
- Paying off debt
- Using a cosigner
Today's homebuyers are also finding creative ways to afford the home of their dreams. After taking into account your annual income and down payment, consider the following ways to increase your purchasing power.
- Local, state and national programs for down payment assistance
- Seller financing
- Shared-equity arrangements
- Loan assistance from family
- Lease with the option to buy
- Short-term second mortgage
- Selling an asset
- Borrowing against 401(k)
Once you've decided to move forward with a home purchase, the next step is to get pre-qualified for a mortgage. Not only will you verify your real buying power, but a Pre-Qualification Letter that is correct and accurate will be an advantage to you in markets where buyer competition is higher.