At some point, your family may need to move into a new home. Whether it’s because your family is growing, because you’re downsizing, changing jobs, or because you just need a change of scenery, it’s not too uncommon to find that you need a new home. Before you do that, though, you do need to know what you can afford. Fortunately, there are some factors that you can consider to determine what you can really afford for your next family home.
Your Current Home’s Value
Perhaps the first thing you’ll need to figure out is how much you’re going to get out of your current house. One great thing is that you probably know that you can already afford a house that costs as much as your own; what’s even better, then, is that you can use the proceeds from your home sale to help close the gap between the price of your old house and the price of your new home. To calculate your home’s equity you need to know several things, including a realistic sales price minus selling costs such as commission, fees, etc. You also need to know the current balance owed to any lenders which you subtract from your net proceeds from the sale. This will give you the amount you will have to use as a downpayment on your next house. For instance if you sell your current house for $200,000 you will probably have to pay the real estate agent 7% and then there are lawyers and other closing costs which might bring the total up to about 10%. So lets assume $20,000. If you contact your lender they will tell you how much it will cost to pay off your current mortgage which might be $150,000 so that would leave you $30,000 in equity to put toward your next home.
Interest Rates
Next, start looking at interest rates. If you last bought a home a decade or more ago, you might be shocked at how low the interest rates are today. Low-interest rates not only mean that you’re going to pay less for your home in the long run, but that you’re going to be able to pay less per month for a home even if it costs more than your current home. Do a little investigating to figure out what rates you might be able to get.
Your Income
Your income always plays a role in what you can afford when it comes to housing. Not only does it make a difference in what you feel comfortable paying, but it will also be a major factor in determining how much of a loan you’ll be able to get from a lender. The good news is that if you make more now than when you bought a home the last time, you’ll likely qualify for a larger mortgage. But rather than trying to get the maximum loan you could try to see how quickly you can pay off your new home. By decreasing the term of your loan, you will have to pay more each month… but not as much more as you might expect. And decreasing the term will greatly reduce the amount you will pay the bank over the life of the loan.
Insurance, Fees, and Taxes
Finally, you’ll want to look at the costs involved in actual homeownership. The cost of homeowners insurance, HOA fees, and property taxes can all add up rapidly. Likewise, the price of paying for utilities in a larger home can absolutely change the way that your budget looks. Do some math to figure out if you can afford the changes along with your new mortgage.
Moving to a new house isn’t always as expensive as you might think. It’s important, though, that you have an understanding of what a new home might cost you and your family. With the right information at your fingertips, you’ll be able to find a home that’s right for you family.
You might also like:
- 7 Benefits of Downsizing to a Smaller Home
- Evaluate Your Finances to Know You’re Ready to Buy a House
- How to Calculate the Costs of Relocation
- Mistakes to Avoid When Buying Your First Home
- Purchase Agreements, Disclosures, Deeds, and Other Vital Documents in a Real Estate Sale
- Saving Up for a New House
