Fleishman Construction and Fleishman Cabinets

Determining Your Price Range

By: Fleishman Design Team

With a few helpful hints, building a new home can be one of the most exciting things a person can do!

From the Builder's Chair

Welcome to another edition of From the Builder’s Chair where we provide you with tips and techniques for building your new home.

Determining Your Price Range

Building a new home can be one of the most exciting things a person can ever do. It can also however, be one of the most overwhelming things as well. We have come up with a few tips and items to look for when trying to determine just how much home you can afford. A very basic rule of thumb is you can spend two and half times your household’s annual gross. That includes income before taxes, Medicare and social security are taken out. Ex) Income is $100,000 a year than you could afford up to a $250,000 house. That is a very basic rule of thumb, there are two other important factors to look at during this period.

Down Payment

When starting this process it is important for a first time home buyer to understand that your savings will need to be relied upon as the main source for the down payment. If you do not have a large savings built up you should avoid playing “shell games” with credit cards. Do not give yourself a cash advance from a credit card to make your down payment, it will only add to your Debt-to-Income Ratio. Debt-to-Income Ratio is the percentage of your monthly earnings uses to pay off all debt obligations. Lenders generally do not like to see this ratio any higher than about 28% of your wages spent on housing costs. Your particular situation may vary but a good plan for first time buyers is to set aside money from each pay period into a separate account. The money will build faster than you think and you’ll keep your debt ratio down.

Taking Our a Mortgage

The second ingredient in buying a new home is the amount a lender is willing to give you towards the purchase. Lenders take into account a number of items when deciding on how much money they may give you.
-Current Earnings
-Existing Debts
-Credit History
-Debt-to-Income Ratio
After taking all these factors into account a lender will determine what they believe you can afford. When starting this process it would not be a bad idea to get yourself pre-approved for a loan to know exactly what sort of price range you are looking at in a new home.

Plan Ahead

The most important thing you can do when getting into owning your own home is planning ahead. Make sure you have done your homework and have a general idea of what you would like. This allows you much more flexibility and keeps personal headaches to a minimum! Make sure to consult a trusted financial or mortgage advisor. Once you have, contact us to help with the next step in building your new home. At Fleishman Construction we have the knowledge and tools to assist you in every step of the way. If you have more questions about building a new home contact us at 515-989-9819.