The decision of whether or not you can afford a new home in Spokane obviously relies on a lot of factors, such as your income, your debt, and your savings. In addition, your credit score and other variables will affect a lender’s decision on whether to offer you a loan and what the interest rate on that loan might be. Every individual and family’s circumstance is a little different, so the best advice is to talk with your your agent to learn about your options. For those who want to develop an idea of what’s involved, though, here’s some general information about figuring out what you can afford in the Spokane real estate market.
It’s Not Just About the Mortgage
One of the first things you’ll likely consider when trying to determine if you can afford a home in Spokane is what the mortgage payment will look like. Keep in mind, though, that more than just the mortgage itself will come into play. For example, you’ll likely need a down payment, there will be closing costs, and your lender may require private mortgage insurance. In addition, you will probably incur moving expenses and should remember that homeownership comes with certain costs for maintaining the property.
Start with Your Income
Keeping in mind the other factors listed above, the easiest place to start determining if you can afford to buy a house is with your salary. Many professionals suggest that the “right” price is about 2 ½ times your annual salary. So, if you make $85,000 a year, the thought is that you “should” be able to purchase a home valued at about $212,500. Another way to look at it is to expect a payment that is 25% or less of your gross monthly income.
Consider Your Debts
Of course, if you are making $85,000 a year but have $500,000 in debt, a lender is going to look at you a lot differently than they would if you made the same amount but had $5,000 in debt. Generally, lenders are looking for someone whose debts don’t exceed 30-40% of their gross income. By planning ahead and paying off some debts before applying for a loan, you will likely find that you qualify for a better interest rate or higher amount.
Put Your Down Payment to Work
A great way to be able to afford the monthly payments on a house that you really want in Spokane is to maximize your down payment. The more money you put down on the property, the lower your monthly payments will be. Most down payments to buy a house in Spokane fall somewhere between three and twenty percent of the home’s value. If you can swing the full 20% (or more), you may also be able to avoid having the additional cost of private mortgage insurance added to your monthly mortgage payment.
If you’re asking “Can I afford to buy a home in Spokane?” we can help. Give us a call and we’ll walk through the process with you.