How do you know if you’re ready? Making the leap from renter to homeowner is a big decision
For some, renting may be the right choice. Because the “down payment” is most often limited to first and last month deposit, renting can be viewed as cheaper and more flexible in the short-term. Monthly rent payments are also generally “all in” and usually cover all property taxes, homeowners’ association
For others, however, buying is the right move to make. They’ve reached the point where they feel confident about staying in one place for a while and are established in their jobs with a dependable income. Their debt obligations – such as car loans, student
If that sounds like you, this guide will help you assess your current situation and better prepare you for the home-buying process.
Depending on the amount you have saved for a down payment, your mortgage payment should typically be no more than 28% of your monthly income, and your total debt should be no more than 36%, although debt ratios have some flexibility, depending on mortgage type you choose.
Generally, a better credit score will help you get a better interest rate on your mortgage. And even a small improvement in your score can have an impact on your monthly payment and save you thousands of dollars over the course of your loan.
Learn more about how to improve your credit score.
Lastly, you’ll need to have some money tucked away for extra costs beyond your monthly mortgage payment. These costs include your down payment and closing costs.
Calculate your monthly payment.
Your monthly mortgage payment will depend on the amount you need to borrow, your annual property taxes and insurance and your locked-in interest rate.
Include your pre-tax earnings, investment income and any other income you receive.
Include auto and student loans, credit card debt payments and other regular debt payments. Do not include current rent or mortgage payments.
Select a percentage of the entire mortgage amount you can afford as a down payment.
This is the mortgage interest rate you'll be paying. Explore different rates to see how your home price is affected.
The accuracy of this calculator is not guaranteed by any party and is intended for educational purposes only. The calculator displayed does not constitute the advice of, or reflect actual products, services, rates and/or terms available from, PNC Bank or its affiliates and nothing contained in the calculator shall constitute an offer or solicitation of a product or service by PNC Bank or its affiliates.
In fact, being pre-approved indicates that you are a serious buyer and may even put you ahead of other applicants once you make an offer!
Pre-approval also has additional perks worth noting. For instance, it helps you determine how much house you can afford and how much money you can borrow. That way your time won’t be wasted looking at out-of-reach properties.
To establish your employment history and financial capabilities, you must provide the lender with the following income documentation:
After the mortgage loan officer receives these documents, he or she will then pull your credit report, assess your financial capabilities, and inform you of how much money you can borrow towards your home.
For more information, check out the article Preparing Your Finances & Getting Pre-Approved.
Now’s the time to contact a reputable real estate agent who can show you homes you can afford.
Use our House Hunters Checklist to help with your home search.
It’s important to find a real estate agent who will:
You might also consider hiring a real estate attorney to:
Get a home appraisal & title search. Once the seller accepts your offer, you may strongly consider hiring a certified home inspector who can verify there are no structural problems, code violations or other undisclosed concerns. When your contract is final, your lender will have the property appraised by an independent, third-party appraiser who will confirm the fair market value of the home.
In addition, a title search will typically be conducted to:
During the closing, you’ll meet with all parties involved in the sale to make it official by signing documents, receiving the deed and paying your closing costs, which may include:
Property insurance: Also called homeowner's insurance, property insurance protects the homeowner from losses to the property, as well as potential liability from events that occur on the property and elsewhere. Lenders require homeowner's insurance coverage to protect the collateral that secures their loan. Some homeowner's insurance policies do not cover catastrophic events such as tornadoes, hurricanes or floods. These kinds of events generally require a separate insurance policy. Sometimes additional insurance may be required for your loan.
Property Taxes and Homeowner's Insurance: A typical monthly mortgage payment consists of amounts for loan principal, interest, taxes and homeowner's insurance. Taxes and insurance are usually paid from an escrow, or impound, account.
*Consult a tax advisor regarding the deductibility of interest
PNC, PNC HomeHQ, PNC Home Insight®, and Home Insight® are registered service marks of The PNC Financial Services Group, Inc. ("PNC"). PNC has pending patent applications directed at various features and functions of Home Insight Planner. All loans are provided by PNC Bank, National Association, a subsidiary of PNC, and are subject to credit approval and property appraisal.
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