The first step towards homeownership is understanding your purchasing power.  There is nothing more frustrating than finding your dream home only to find it doesn’t fit your budget.  By preparing a budget, understanding your out-of-pocket costs and getting pre-approved, you will be on your way to purchasing a home you can afford.  

Preparing a Budget

First, determine how much money you have for a down payment.  The most common amounts are 3.5%, 5%, 10% and 20% or more.  If you currently own a home, we will help you determine the amount of equity you will gain when you sell or refinance. 

Next, determine how much money you have for closing costs.  This will be in addition to your down payment.  Closing costs are approximately 3% of the sales price but this is dependent on the type of loan you are using and can include lending fees.  It is sometimes possible to have your closing costs financed in some cases, we will advise you on this and help connect you with a mortgage broker who can help determine a percentage you can use for your calculations. 

The next step is to consider your budget and decide how much of a monthly mortgage payment you want or can afford.  Download a mortgage calculator app on your phone or computer and begin to familiarize yourself with how they work.  

Finally, we are happy to refer you to a mortgage lender.  We have a list of several who we recommend for a smooth, timely closing.  We believe that having a lender who is local and available for one on one in-person meetings is vital.  We also know that when you find your perfect home, having a relationship with a local lender and a letter showing you are prequalified to purchase gives us negotiating power.   

This content is not the product of the National Association of REALTORS®, and may not reflect NAR's viewpoint or position on these topics and NAR does not verify the accuracy of the content.