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- How Much House Can You Afford? Understanding Your Budget
How Much House Can You Afford? Understanding Your Budget
Wyatt Lovera
January 24, 2025
Dream Big, Budget Smart
Buying a home is an exciting journey, but knowing how much house you can afford is the first step to turning dreams into reality. Let’s break down the process into simple steps to ensure your home-buying experience is smooth, fun, and stress-free.
Step 1: Know Your Numbers
Understanding your financial picture is key to determining your budget. Start here:
Calculate Your Income: Add up all sources of income—your paycheck, side hustles, or other revenue streams.
Understand Your Expenses: Know your monthly commitments like rent, car payments, utilities, subscriptions, and other recurring costs.
Factor in Debt: Your debt-to-income (DTI) ratio matters! Ideally, aim for a DTI under 36% for better loan eligibility.
💡 Pro Tip: Use an online affordability calculator to get a quick snapshot of what you can comfortably afford.
Step 2: Don’t Forget the Extras
Your home’s sticker price isn’t the full story. Factor in these additional costs:
Down Payment: Typically, you’ll need 3-20% of the purchase price upfront.
Closing Costs: Plan for 2-5% of the home’s price for fees like inspections, taxes, and legal expenses.
Monthly Mortgage Payment: This includes principal, interest, taxes, and insurance (PITI).
Ongoing Costs: Budget for utilities, maintenance, and HOA fees (if applicable).
💡 Fun Fact: A $300,000 home with a 10% down payment and a 30-year fixed mortgage at 6% interest costs about $1,800/month, excluding taxes and insurance.
Step 3: Define Your Comfort Zone
It’s tempting to max out your pre-approval, but ask yourself:
What monthly payment fits comfortably within my lifestyle?
Can I still save for emergencies, vacations, or other goals?
How stable is my income?
Keeping your budget realistic ensures your dream home doesn’t become a financial burden.
Step 4: Get Pre-Approved
A mortgage pre-approval isn’t just a helpful tool—it’s essential in today’s competitive market. It shows sellers you’re serious and gives you a clear limit for your search. Work with your lender to explore loan options, including first-time buyer programs, VA loans, or FHA loans that may reduce upfront costs.
Denver Market Updates: What to Watch
Stay ahead with this week’s key insights into Denver’s housing market:
🏡 Inventory Boost: New listings are beginning to trickle in, setting the stage for more choices in the spring market.
💡 Suburban Appeal: Homes in Denver’s suburbs with larger lots and modern layouts continue to attract buyers.
📉 Rate Trends: Mortgage rates remain steady but could increase soon, making now a good time to lock in financing.
🏘️ First-Time Buyer Incentives: Colorado offers grants and assistance programs to help first-time buyers get started—don’t miss out!
Let’s Make It Happen
Understanding your budget doesn’t have to be overwhelming. By breaking it down and focusing on what you can comfortably afford, you’ll feel confident stepping into the market. Ready to take the next step? I’m here to guide you every step of the way.