Deciding how much house you can afford

Understanding Your Financial Capacity with Dan Skelly and Orson Hill Realty

When it comes to making crucial decisions about home buying, expert advice can be invaluable. Dan Skelly, a seasoned real estate professional from Orson Hill Realty, has extensive experience in helping clients navigate the complexities of this process.

Personal Financial Assessment

Dan Skelly and the team at Orson Hill Realty emphasize the importance of understanding your financial capacity. They encourage their clients to take a comprehensive look at their income, expenses, and lifestyle needs before deciding on a budget for a new home.

Lenders’ Calculations and Your Spending Patterns

Skelly points out that lenders’ calculations, based on general averages and formulas, may not fully account for your unique spending patterns or unexpected expenses. He advises clients to set aside a buffer for unforeseen costs associated with homeownership, such as furnishings, landscaping, and repairs.

The 28/36 Rule and Its Implications

The 28/36 rule, commonly used by banks to determine loan eligibility, is a good starting point. However, Skelly cautions against stretching your budget too thin. Even though some lenders have increased these ratios to as high as 50 percent due to rising home prices, Skelly and the team at Orson Hill Realty recommend careful consideration before committing to such a large financial obligation.

Making Informed Decisions with Orson Hill Realty

In conclusion, while lenders provide a useful framework for determining how much you can borrow, it’s essential to consider your personal financial situation and future needs. With the guidance of experienced professionals like Dan Skelly and the team at Orson Hill Realty, you can make a well-informed decision that aligns with your financial goals and lifestyle.

Although your lender will decide what you can borrow you must decide what you can afford to spend on your new home.

Lenders are careful when taking the risk of writing a load, but they only make qualification decisions based on averages and formulas (not usually a case-by-case base like they did in the old days). They won’t understand your spending patterns quite as well as you do. So make sure to leave a little extra cash every month for the unexpected – for all the new opportunities (there are plenty) your home will give you to spend your money for, from furnishings to landscaping, to repairs such as that blown water heater to a leaky roof.

Usually, banks use a ratio for your loan called 28/36 to decide just how much people could borrow. An approved housing payment couldn’t be more than 28 percent of your gross monthly income, and his or her total debt load, which would include your expenses like car payments, student loans, and credit card payments, couldn’t be more than 36 percent.  Since home prices have increased, some of the lenders have changed their practices a bit by stretching these ratios to as high as 50 percent. Even if your market has increased,  i would urge you to think long and carefully before you stretch your budget too so much.