What Factors Determine How Much Home I Can Afford in Glendale
Glendale is one of the safest cities in America and an ideal place to raise a family. So if you are considering purchasing real estate in Glendale, we encourage you to find out how much you can afford and how much you can get approved for before house hunting.
Browsing available homes without knowing how much you can get approved for can lead to disappointment if it turns out you’re unable to qualify the amount required for that property. Remember that how much you’ll be approved for is not based on what you need but on how much you qualify for.
This article will review the major factors that determine how much you can qualify to buy a home in Glendale as well as the costs of ownership that you’ll need to consider when estimating affordability.
Credit scores show how you responsibly manage your finances and are a major factor in determining how much home you can afford. Lenders use minimum credit score guidelines to determine whether a borrower gets approved. For conventional loans, minimum credit scores are usually set at 620, while an FHA loan gives buyers with scores as low as 580 a chance to qualify.
Borrowers with low credit scores may still get approved but pay higher interest rates.
If you are planning to buy a home in Glendale, you need to update your credit reports, especially if inaccurate entries can lower your scores and hurt your chances of buying your dream home.
Debt to Income Ratio
Your DTI shows how much of your income goes toward debt payments. Lenders use this debt-to-income ratio to determine how likely it is that you’ll be able to keep up with the monthly expenses.
Typically, we’ll want to see a max of 43% when considering loan approval for home buyers.
A high DTI due to student loan and credit card debt also affect the max dollar amount you’ll get approved for.
Your down payment is the amount you can afford to pay upfront for the home. Depending on the loan program, this amount can range from 0-20% down, although, for most programs, 3.5% is the norm.
Although 20% down is not typically required, there are benefits to paying this amount upfront. The main one is avoiding the payment of PMI or private mortgage insurance. You’ll also save on interest payments because the more money you put down, the less you’ll finance.
One of the most obvious factors to consider when determining how much home you can afford is your income.
Lenders will look at how much you make each year to know if you can afford to pay your monthly mortgage installments. There’s no “ideal” salary range for general loan approval. What’s important is how your ability to pay the mortgage loan given your salary and other monthly obligations.
Verification of your income is completed by submitting pay stubs, W2s, tax returns, and proof of employment.
For a self-employed mortgage, there are other documentation requirements. They vary according to lender, but generally, bank statements and 1099s are needed.
Interest rates can be fixed or adjustable, depending on the loan program and the current market. The rate you are offered also varies depending on your down payment, credit score, and other factors.
Take note that even a slight change in interest rates can translate to hundreds or even thousands of dollars in interest paid on the loan’s lifespan.
Costs of Homeownership
Once you get approved on your loan, you need to consider the added expenses you need to factor into your budget as a new homeowner.
Now that you’re a homeowner, you are expected to pay property taxes from here on. How much you will pay is based on your home and lot size and other location criteria.
Based on information from the Tax Foundation, the effective average rate for property taxes nationwide is 1.1% of the home’s assessed value. Keep in mind that property taxes are paid even when your mortgage is paid off.
Homeownership requires responsible home maintenance. You must set aside a budget for maintaining your roof, HVAC system, plumbing, and electrical system. You also need to keep an eye on termites and mold and ensure they are dealt with immediately.
When you own a home, you’ll have new bills to pay like heat, water, sewage, electricity, cable, internet, and garbage collection. Owning a larger home means higher utility bills since your HVAC system needs to work in a bigger space.
Home Association Fees
If you live in a condo or gated neighborhood, you’ll likely pay for association fees that are charged either monthly or yearly. In Glendale, HOA fees are typically several hundred per month and pay for services like lawn maintenance, common grounds maintenance, and community pool maintenance, to name a few.
It’s always a good idea to protect your property and possessions from natural and man-made disasters. Home insurance should always be a part of your budget. Most lenders won’t approve your loan without home insurance that covers the home's purchase price.
Buying a Home in Glendale: Next Steps
A home is the single largest purchase a person can make in his lifetime. Before taking on such a huge responsibility, you need to crunch the numbers. Once you’ve computed everything, think about your situation and your lifestyle.
To give you an idea of how much house you can afford, you can get prequalified or pre-approved. Having a pre-approval letter when shopping around for your home can be used as leverage when negotiating an offer, especially in hot real estate markets like Glendale.
Before you sign on the dotted line, consider the costs and how this high-cost loan will impact your life and budget.
Ask our loan officers from Nuline Funding for advice and the best loan products that can fit your needs.
* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.