Most lenders require at least 20% of the property’s value as a down payment. This is a good starting point for building equity in your home. Also, a 20% down payment can lower your monthly payment and qualify you for a lower interest rate.
Once you have the estimate, you’re ready to shop for homes. Many sites offer mortgage affordability calculators that will give you an idea of what you can afford based on your income, monthly debt, and credit score. You can also use these tools to determine the best time to buy a house. You may wish to invest in boosting your credit score. The sooner you can afford a mortgage, the better off you’ll be once you’re ready.
This rule is based on a 36% debt-to-income ratio standard, which means your monthly payments cannot exceed 36% of your monthly income. In other words, if your monthly payments are already lower than that, you might be able to afford a home worth only five times your savings. Alternatively, if you have enough money in your savings account to pay three months’ worth of mortgage payments, you can get a mortgage worth a few hundred thousand dollars more.
After getting pre-approval from a lender, you should make a down payment to put on the home. A 20% down payment eliminates mortgage insurance, freeing more cash for the principal. You may also find yourself with a lower interest rate, which means you can borrow more money. Then, you can estimate your monthly mortgage payment.