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How to's and money-saving tips from resident homeowner and mortgage professional, Cathy West

These tips will help first-time homebuyers figure out how much home they can really afford.

How much home can I afford?

Many websites have quick calculators to estimate the amount a homebuyer might be able to spend on a home. Yet, these algorithms produce more of a ballpark range than an exact measure. This is because there is more to consider when deciding how to finance your home than simply income and home cost.

When planning how much to spend on a home, there are many factors for homebuyers to think through, including typical spending habits and unforeseen events. Here are three you'll need to consider:

Debt-to-income ratio
Many lenders use a rule of thumb to assess a buyer's finances and determine how much they are able to spend on a home, according to Zillow. This rule, aptly nicknamed the 28/36 Rule, dictates that a mortgage payment should not exceed 28 percent of a buyer's pre-tax income, and their debts, including the mortgage and other debts, should not exceed 36 percent of the pre-tax income.

These ratios vary among lenders, and can also vary based on credit score or loan type. But this handy trick can be especially helpful for buyers trying to determine their financial capabilities prior to consulting with a lender. 

Don't forget to think long-term
While debt-to-income ratio is one of the first things a homebuyer will hear when discussing a new home with a lender, that ratio only represents where a buyer's finances stand now, NerdWallet warned. The ratio does not predict or account for where a buyer might be a few years into the mortgage.

It's important for homebuyers to remember future expenses that come alongside buying a home: maintenance and repairs, furnishing and appliances. Not to mention other life changes that decrease cash flow such as job loss or having children. 

Sweat the small things
Any homebuyer's primary concerns when it comes to affordability will be the mortgage, the down payment and any loans involved. These are, of course, primary factors in determining how to finance a home, and what home a buyer is capable of affording. But there are many other factors, Zillow noted, that may be overlooked.

Interest rate is an important aspect of the home-buying investment. The amount of interest can greatly affect the mortgage rate a buyer is able to afford, so it is important to read all the fine print when looking at prices. Another important consideration is lifestyle. Sure, a buyer might be able to a afford a certain home, but will they be able to continue their preferred lifestyle and spending habits once the bills roll in? It's always important to err on the side of caution when buying a home, Bankrate noted, so as not to end up stuck between a rock and a hard place.

For first-time homebuyers, it can be tricky to figure out an ideal spending range. Though there are straightforward tricks to help get an idea of the best cost range for a given income, lifestyle factors and future possibilities should always be considered in the budgeting process.

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