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    What is your Home Buying Price Range?

    Figuring out your home buying price range can sound confusing, but it doesn’t have to be. When you first think about moving to a new home, you might wonder what price range you can consider when you start to shop around. It can get a little complex considering the home you are living in now would actually cost you more to buy if you were looking at it today. And if you are renting, you might not even know how much you can spend to stay within your budget.

    What is your Home Buying Price Range?

    How to Determine your Home Buying Price Range

    6 Different Payment Categories

    So, while it can be a little complicated to arrive at how much house you can afford, the big numbers you need to know in order to estimate your home buying price range can be broken down into about 6 different categories. Put these together, including any HOA figures, and you will have a good idea of your home buying price range.

    1. Cost of the home
    2. The taxes for the home
    3. PMI – Private Mortgage Insurance
    4. Homeowner’s Insurance
    5. Home Owners Association (HOA) fees
    6. Down payment you’ll be making

    Understanding What Makes Up your Monthly Mortgage Payment

    Let’s start with the home loan itself. This is broken down into these 5 parts: principal and interest + taxes + PMI + homeowner’s insurance. Let’s cover these areas plus any HOA fees you might have for the neighborhood, and any downpayment you will be making with the initial loan application.

    First, there is the principal and interest to consider. This is the dollar amount you will pay back to the bank for the cost of the home. Interest is what is being charged for borrowing and using this money to buy your home. These will be the biggest expenses of your home purchase and your monthly payment.

    The property taxes for your new home will probably be your second largest portion of your monthly installment. Often this is added on to your mortgage payment and included in your monthly payment.

    Private Mortgage Insurance will be included in your monthly mortgage payment as well. This is an insurance to cover the bank in case you default on the loan. It will be included in your mortgage until a certain period of time when it can be removed and your mortgage payment can be lowered. If you want to avoid this portion of the payment, you can put down 20% of the cost of the loan initially and this will bring your monthly payment down by eliminating the PMI portion of the loan.

    Homeowner’s insurance is important to remember as well. It’s not something you can skip and it’s not something you will want to be without. You can guess a little, but to get a good idea of the costs, speak with your insurance provider. They will ask for some addresses and give you a review of what these homes would insure for.

    While HOA fees aren’t usually part of the total for your mortgage, you should consider this as part of your home purchase payment. You may pay this quarterly or yearly by sending a payment directly to the HOA management group.

    Now that we have these 6 points roughly defined, how do you figure out what your price range is with these?

    Where to Start with Figuring Out What Home Price Range you can Afford

    I like to start with what you are currently paying in your current rent or monthly mortgage payment as a range for your current budget. If this budget is something you can and want to continue to work within, use this as your guidepost for your price range.

    Utilizing a Mortgage Calculator

    From here you will need to work backwards a little with a mortgage calculator. You can find a calculator online easily. Then you will plug in all the numbers that you know to start with:

    • Home Price
    • Down Payment
    • Interest Rate – this will probably fill in on its own based on current rates as an average
    • Property Taxes
    • PMI – this will also probably fill in on the calculator. It will be around .5-1%. Speak with your mortgage lender for a more accurate number in your situation.
    • Homeowner’s Insurance
    • HOA Fees

    *Curious to know where to find these numbers? Most of these numbers will be in the home listing, so that’s a good place to start. Some of these figures will go up after your purchase so it’s important to speak with an experienced real estate agent for helpful guidance.

    When I say work backwards, what I mean is once you have plugged in the numbers above and allowed the calculator to give you a figure, you can make adjustments on the home price to see where the monthly payment number comes in. If it’s too high to give you a monthly payment that you like, you know you need to rework the home price or the down payment so it adjusts and meets your budget requirements.

    You’ll Find a Great Property

    This might take a little reworking, but it shouldn’t take too long before you have a good sense of what price range you can start shopping in. There are homes for everyone you just have to look to find the best place. And, it’s a good process to go through so you have a good handle on what your home buying price range will be.

    Are You Looking for a Real Estate Agent?

    When you are ready to sell your current home or buy a new one, look to a top-rated and experienced real estate agent. An agent that is familiar with the locations and types of properties you love in the Memphis area. Whether it’s residential or open land you’re looking for, work with a real estate professional that you can trust.

    Click here to learn more about me and how I can help you with your home purchase, buying parcels of land, or looking to move to a new home. My skills and education are focused on what you need for a great real estate experience. I would love to chat with you and answer any questions you might have. I will also help you with your home staging and can put you in touch with a great handyman and cleaning crew to make your home look its best. Contact me at (901) 828-8919 or drop me a quick note angie@angiekelley.com. Look forward to speaking with you today!

    Angie Kelley, Crye-Leike Realtors
    (901) 828-8919 or (901) 840-1181