If your credit is within an acceptable range to qualify for a home loan, you’ll want to know what price range you can shop in. If you search new homes for sale in Weslaco on almost any real estate search site, you’ll quickly find there aren’t many, and the lower-priced ones are small. Right now there are some priced at $120,000 or less, but they’re pretty tiny at around 1,000 square feet.
That’s not enough room for most people. It’s tough to find new construction with the amenities most buyers are looking for in a good location and comfortable price point, but the good ones are out there.
To calculate your home shopping budget, here’s what you need to do:
- List all income including your salary, your co-borrower’s income, investment income and any other source.
- List your monthly expenses. Include your car payment, alimony or child support payments, student loans, credit card debt and anything else you owe regularly.
Use the 28/36% rule to calculate your home budget. Financial advisers typically recommend people only spend up to 28 percent of their gross monthly income on housing, and no more than 36 percent on all of their debt put together.
Multiply the number you got for total income by 28 and divide by 100. For example, if you make $5,000 a month, $5000 x 28 = $140,000 Divide that number by 100. $140,000 / 100 = 1,400. You can spend up to that amount monthly on housing, depending on what you owe elsewhere.
However, if you owe a lot on other debt, that takes away from what you have to spend on your mortgage. Use the same formula to calculate 36 percent of your overall income. Housing plus your other debt shouldn’t exceed that amount. How much home you can afford also depends on what kind of down payment you have saved since what you put down reduces your overall debt.
At this point, you might start working with a lender and get pre-approved for the correct amount. That often helps the buying process go more smoothly when you find the right home, because most the preliminaries have already been taken care of.