Figuring out how much you can afford for Beavercreek homes is the essential first step for house shopping. While you may have some ideas about what your perfect home would include, most people don't have unlimited budgets. Knowing what you can get for your money is essential to a successful house-buying experience. 

How to Calculate Your Potential House Payment

Lenders use various ratios to help determine how much money they can lend you. Every situation is different but in general, lenders want to keep your house payment somewhere between 25% and 32% of your monthly income before taxes.

To get an idea of what a reasonable house payment looks like for you, follow these steps.

• Add up all your monthly income
• Multiply it by 25% (.25).

Use the lower percentage to start. You will likely look at that number and know you can afford a little more. That's a good thing. You'll want a little bit of a buffer to account for the variables like insurance, taxes, and different interest rates. Your monthly mortgage payment will obviously include principal and interest. But it also includes insurance, property tax, and home owner's association fees and PMI if those apply to your situation.

Get Pre-approved

Getting pre-approved for a mortgage and discussing your personal situation with a lender will help you know where you stand financially and help narrow down the price range and neighborhoods you can look at. And there will be fewer surprises when it comes time to actually secure financing.

Lenders are mainly concerned with two things. The percent of your monthly income taken up by your mortgage payment, and the percent of monthly income that goes toward all debt (including your mortgage payment). You just figured out the percentage of your monthly income going toward a mortgage payment. So what about debt? Most lenders want to keep your total debt including your mortgage payment to under 40% of your monthly gross income. That means if you have a large car payment or lots of credit card debt, a lender will likely want you to eliminate some of that before approving your final financing.

Make Sure Your Monthly Payment is Right for You

Remember that you are the one that has to live with your monthly mortgage payment for many years to come. The pre-approval process doesn't take everything into account that lenders will see when you actually apply for financing. Keep in mind it is possible to get pre-approved for a larger mortgage with bigger monthly payments than you may actually be comfortable making. That's why figuring your monthly payment budget before you talk to a lender is important.

You don't want to endanger your emergency fund or your ability to cover monthly expenses. If you can't pay for the occasional emergency repair or take a vacation every once in a while, you're likely to be more miserable than happy in your new home. If you have a spouse, make sure you are both on the same page about what you can reasonably afford. Since you know where you're starting, you can also put your numbers into an online mortgage calculator to help calculate your payment with different interest rates and factor in your down payment.

Our REALTORS® can offer you guidance and answer your questions about the home buying process. Contact Wright-Patt Realty to get started finding the right home for you.