kingfisher ok homes for sale - Ray Roman Realty

2 Steps to Calculating How Much Mortgage You Can Afford

One of the first things you need to do prior to searching for some Kingfisher, OK real estate to buy is to determine how much of a monthly mortgage payment you can afford. You want a home that will not strain your budget and cause you to be financially in over your head.

Most lenders use a formula to calculate how much of a mortgage payment you can safely handle. Having said that I always recommend that you take into account others factor lenders normally do not. As a Kingfisher, OK Realtor I also help my prospective buyers create a budget allowing them to have a very clear picture of their monthly finances and financial obligations.

Step 1: General rule most lenders use.

The rule of thumb most lenders will use to determine what home price you can afford is 2X to 3X your gross income. So if you make $80,000.00 per year gross you can, according to their rule, typically afford a home price between $160,000.00 to $240,000.00.

Step 2: Let’s not forget debt.

Lenders also have a rule of thumb when it comes to your debt to income ratio. When lenders determine your debt to income ratio they use the 28/36 rule for conventional financing and 31/43 for FHA loans.

Let’s take a look at how these number work.

Let’s assume you make $80,000.00 gross per year.

80K times 28% divided by 12 months= $1,866.00. That is your maximum allowable monthly mortgage payment.

You’ll also need to add all your monthly bills and add that your potential mortgage payment. The combined total should not exceed 36 % or $2,400.00.

Caution: When it comes to monthly expenses please be careful that you don’t neglect anything important and substantial. I personally have seen folks who borrow the maximum the lenders says they can borrow and then find themselves in a hole. You need cash for other things in life. Make sure you have a decent amount of money leftover after your mortgage payment and monthly bills. This is where living below your means comes into play.

The numbers used by lenders are not cast in stone and can vary depending on your financial picture, your credit history and credit score.

Bonus Tip For Renters:

Here is another quick way to determine how much you can afford if you are a renter. Simply multiply your current monthly rent by 1.33. This will give you a rough estimate of your mortgage payment. This is assuming you are not struggling to pay rent.

6 Steps to Take Before You Buy a Home

As a potential Kingfisher, OK real estate buyer you may be nervous and apprehensive over the fact that you are about to take on a very large financial responsibility. That’s completely understandable, and often times expected.

There are, however, several things you can do to ease your stress and apprehension. These steps will help you feel more confident that the house you will be purchasing is the right home for you and your family.

Below I have summarized 6 steps you should take prior to purchasing a Kingfisher, OK home take that will help you in making a smart and informed purchase decision.

1) Calculate how much of a mortgage payment you can afford.

The general rule of thumb is that you can afford a home priced 2 to 3 times you gross income. I recommend you stay closer to 2 times your gross. I have always been a big fan of living below your means and if buying a little bit less house is going to be financially better for you then do it. In your calculations don’t forget to include other costs of owning a home such as insurance, maintenance, homeowners association fees, property taxes. You’ll also have utilities, transportation, daycare etc. Create a budget and stick to it, and don’t under-budget just to make the house payment fit.

2) What type of house do you want?

Before you start searching for a home sit down with your partner and determine what you need in a house. How many bedrooms? How many bathrooms? What type of kitchen do you want? Think about future needs such as a home office? Have a clear vision of what you want and convey that to your Realtor prior to beginning your search.

3) Where do you want to live?

Determine what community or area you want like to live in. Do you need to be close to work? How about the distance to schools, shopping or recreation? These are all things you need to think about so that the home you ultimately purchase suits you in the way you planned.

4) You’re going to need money up front.

You mortgage lender is going to need a down payment in addition to other costs you will incur. Lenders usually require a 20% down payment but with certain types of loans you might only need 5%. Try and save up as much money as you can for a down payment as the more money you put down the easier it might be to qualify for a loan. Do keep some money for emergencies. If you end up with a smaller down payment you will end paying PMI insurance which can increase your monthly payment. Do check with your Realtor for any first-time home buyer programs that might be available.

5) Watch out for closing costs.

Beside the down payment you will incur additional costs as part of the closing on your Kingfisher OK real estate. You’ll also need money for a home inspection, appraisal, termite inspection, attorney fees, recording fees, transfer fees, homeowners association fees etc. Ask your Realtor to go over typical closing costs so that you’ll be prepared.

6) Clean up your credit report.

Lenders will pull your credit report as part of their due diligence when determining whether to approve a loan. If you have late payments, bad debts, bankruptcy etc. they will affect your credit score. The lower your score the less likely you will get approved to receive loan with terms that are favorable to you. You will pay a high interest rate and may be required to have a larger down payment, or even a co-signer. A credit score of 620 or more is what lenders look for. If you are a year or more away from purchasing now is the time to clean up your credit. There are lots of resources online than can help but please be wary of credit repair companies. Most a bogus and will take your money and do nothing. Most, if not all, of what they do you can do yourself.