Some of the most common questions hopeful homebuyers ask before looking at available homes are, “How much house can I afford?” or “How much money do you need to make to buy a house?” If you are asking yourself these questions, it’s vital to consider your long-term earning potential and the long-term cost of ownership of the house you want to purchase. Hillwood Communities wants to provide you with the information you need to buy the home you want.
Can I Afford to Buy a House?
A common question among first-time homebuyers is “How much money should you make to buy a house?” According to hsh.com, you should make just under $64,000 per year to be able to afford a home at the median price of $269,900 in the Dallas area. Of course, there’s no hard and fast rule here but typically, employment and steady income are basic requirements when deciding if you’re ready to become a homeowner.
Other important pieces of data to look at are your debts, your credit score, and how much money you have in savings. What is your debt-to-income ratio? If you already have student loans, a car note, and credit card debt, can you afford to add a house payment and the other expenses that go with homeownership? What about your credit rating? If you have a spotty history of paying your bills, you may find it difficult to get a home loan. Finally, how much money do you have in savings? Most mortgages require some form of down payment and it’s crucial to have some money saved to cover other expenses that may arise with your new home.
How Much Mortgage Can I Afford in Texas?
There are a few formulas you can use to answer the question, “How much home can I afford in Texas?” The basic rule of thumb is that your housing costs should not account for more than 28% of your gross monthly income, and total debts should not be more than 36%. Our online mortgage calculator will help you determine what mortgage payment you can afford based on your current debts and your current salary.
If you are still asking, “What property can I afford?” remember that monthly mortgage payments typically include more than just the amount to pay off the home loan.
Part of the cost of owning a home is paying annual property taxes and homeowner’s insurance. Many people choose to make monthly payments towards their taxes and insurance along with their home loan payments. The tax and insurance payments are put in escrow and then paid on an annual basis to the insurance company and taxing authority on behalf of the homeowner. If you do it this way, each monthly payment you make will include portions that go toward the loan’s principal amount, accrued interest, taxes, and your homeowner’s insurance (PITI).
Many mortgage calculators include PITI when calculating house budget based on salary and some let you choose whether or not to include taxes and insurance. Of course, even if you choose not to escrow taxes and insurance, you still have to pay them.
Affording Texas Mortgage Payments
In 2021, the average mortgage payment for a Texas home is about $1,179.
Your down payment plays a big role in determining your mortgage payment. The larger your down payment is, the less there will be remaining from the loan principal, so your monthly payments will be smaller than they would if you only paid the minimum down payment amount. On average, Texas homebuyers in 2021 will pay about 12% of the home market price in their down payments. Your down payment amount will be very important when you create a preliminary house budget based on salary and your other financial obligations.
When you’re ready to buy, investigate different types of loans, including those for first-time homebuyers. For example, a Veterans’ Association loan may offer zero down payment if you qualify. You could also qualify for a Federal Housing Association loan that only requires a 10% down payment. USDA loans are ideal for low-income homebuyers and offer zero down payment to qualified borrowers. Instead of just asking yourself, “What house can I afford?” start reviewing your options for financing, especially if you are a first-time buyer. Depending on your eligibility, you may be able to afford more than you think.
Other Costs To Consider
Once you have a general idea of how much you need to buy a house in Texas, consider a few other costs that are likely to arise during and after the purchasing process, including:
- Property taxes. Your property taxes in Texas will increase as your home’s value increases.
- Homeowners’ Association (HOA) fees. If you purchase a home in an area that has an HOA, you’ll need to account for these fees in your budget.
- Closing costs. You’ll face additional costs beyond your down payment when you sign your mortgage, including a loan origination fee, home inspection fee, and an appraisal.
These are just a few of the additional costs to consider when asking yourself, “How much house can I afford in Texas?”
Ready to Start the Home Buying Process?
The master-planned developments by Hillwood Communities are great places to live, whether you’re interested in buying a move-in ready home or building a new home on a spacious Texas homesite. We can help you find an affordable home that offers a stellar long-term cost of ownership. Contact us today to learn more about our communities and the homes we currently have available.