Assess Your Real Buying Power

With some priorities and goals in mind while gathering your listings, now is a good time to get a real idea of what you can afford and the steps you can take to begin preparing your budget for a mortgage, property taxes, and potentially homeowners insurance and homeowners association dues. While lenders vary in leniency, most require good credit, a sustained pattern of saving money and paying your bills on time, and roughly a debt-to-income ratio of 40 percent (gross monthly income compared to minimum payments on recurring debt(s)).

 

How Much of a Mortgage Can I Afford?

First-time-home-buyers often confuse this question as being “What house can I afford to buy?” When really, the question is slightly gloomier: “What can I afford to maintain—even if things take a turn for the worst (e.g. lose a job, hospital bills)?” To get an idea of monthly payments you can afford, try our mortgage calculator. Give yourself a range from conservative to aggressive, in terms of how much you’re willing to spend, and weigh that against your list of potential homes.

 

What is My Credit Score?

Even if buying your first home seems years away, you can do a lot to improve your standing with lenders in the meantime. Focus on paying down your credit cards, paying your bills on time, and raising your credit score.

As a benchmark, below 620 is considered poor, 621-659 is fair, 660-699 is good, 700-759 is very good, and 760 and above is ridiculously good, and we’re jealous.

There are plenty of ways to check your credit score, some better than others. We’ve listed a few below, along with benefits and drawbacks.