Your home is one of the biggest purchases you will ever make and, as a first-time homebuyer, you will get a lot of advice. Many people will tell you the same thing: “Don’t buy more house than you can afford”. Budgeting for a home can be a challenge but it is possible. Learn a few tips for affording your first home.

If you are planning to buy a house in or near Lexington, SC, work with the Lafayette Team with EXP Realty. We specialize in first-time homebuyers and sellers. We can help you understand what goes into affording your first home.

There is much more to it than getting a pre-approval letter from the bank. Unfortunately, first-time homebuyers often don’t consider the other expenses involved in owning a home, which means they are setting themselves up for failure.

In this article, we’ll explain a few of the things that are involved in affording your first home.

4 Tips for Affording Your First Home

Below, we’ll explore 4 areas that can help you understand more about affording your first home:

28% Rule

When looking at your mortgage application, the lender will consider your debt-to-income ratio. The 28% rule is the easiest way to calculate your homebuying budget. This is the rule stating that your mortgage should be less than 28% of your gross income. According to the Federal Housing Administration, it can be as much as 31%. However, it is important to consider your other debts to determine how much you can truly afford.

Expenses in Addition to the Mortgage

Another important factor in affording your first home is to understand that your mortgage is not the only consideration. There are other recurring expenses that come with owning a home including utilities, repairs/maintenance, homeowner’s insurance, and more.

These expenses can significantly increase the amount that you’re spending every month, making it more challenging to afford homeownership.

Down Payment Dictates Purchase

As a general rule, you are expected to put down 20% of the purchase price. In some cases, you can still get a mortgage, as long as you pay for private mortgage insurance or PMI. This will usually add 0.5% to 1% of the total amount. There are several factors involved in determining PMI, including the property appreciation potential, your credit score, and more. The higher your down payment, the less you’ll pay over the life of the loan.

In addition, your down payment amount can impact the house you buy. For example, if you have enough to put down 20% on one house but 10% on another, the cheaper home will be more valuable.

Choose a House You Can Maintain

When you are considering affording your first home, you should also keep in mind the size and condition of the property. Find out about average utility costs in the area and, if the home needs repairs/renovation, find out how much it could cost. These factors can be used when you are thinking about your budget and affording your first home. When thinking about these things, be sure to be realistic about your expectations and abilities.

Let The Lafayette Team help you find a house that is right for your needs and your price range. We specialize in working with first-time homebuyers. Contact us today!