How expensive a house you can afford largely depends on the level of your monthly payment. There will be property taxes, insurance, and upkeep, but your monthly payment will probably be the most important part of your decision.
The fine line you walk when determining a level of down payment is based on the level of mortgage payment you can afford and how much money you have for the down payment. Mortgage rates are constantly changing, and there are all different types of mortgages available.
Here is a chart showing monthly payment levels for different amounts at different interest rates. It reflects using a 30-year fixed mortgage. Payments with a 15-year mortgage will be higher, but you will pay off the mortgage sooner and pay much less interest over the life of the mortgage.
Monthly Mortgage Payments at Different Interest Rates (30-year fixed rate mortgage)
|If you are looking at mortgages of different levels, you can use the chart to estimate or use our mortgage payment calculators to find an exact answer.|
Most lenders require certain levels of down payments to consider you for a mortgage. It often ranges from 5 percent of the purchase price to 25 percent. The larger the down payment, the more comfortable they will probably be giving you the mortgage. However, you should also remember it may be nice to have some extra money available after you move into your new home. New carpeting, new furniture, or improving the landscaping all take money. You should not stretch yourself too thin.
Here are some ways to consider to build funds for the down payment.
Buying a home, especially a first home, is a big financial and emotional step. If buying a home is important to you, do your homework. Investigate your mortgage options. Determine what level of monthly mortgage payment will be affordable and comfortable. Use some discipline to save your down payment.