Do you make enough money to buy a home?

Understanding how to build a homebuying budget ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ [Better] [Better]( This week's mortgage rates [Rate chart] [Rate chart]( Source: US average mortgage rates from [FreddieMac]( --------------------------------------------------------------- Better Mortgage Interested in today's rates? [See Better Mortgage rates]( --------------------------------------------------------------- #FundFact 🏡 A report found that 44% of homebuyers put down less than 20% to buy a home in 2022.¹ Things to know How much home can you afford? How much home can you afford? “Do I make enough money to buy a home?” is a fully loaded question. Buying a home is often the largest purchase the average person makes in their lifetime, yet public knowledge on the matter is obscure. 56% of respondents that participated in a recent survey failed a quiz including some of the most common homebuying terms such as “mortgage rate” and “down payment.”² Only 6% of Gen Z received an A on the quiz.² This is important because staying sharp and developing the right strategy for yourself during the homebuying process can help you avoid wasting thousands of dollars over the life of your loan and help you figure out where you can afford yourself savings. Ultimately, whether you make enough money to buy a home depends on the cost of the home, and how much house you can afford is determined by two main things: - How much you’re ready to put down for a down payment and closing costs - How much you can afford as a monthly housing payment. Lenders determine this using your debt-to-income ratio, and the maximum DTI is often between 45-50% Interest rates also play a large role in affordability. When interest rates are lower, your monthly housing payment is lower, and then you can afford more home. Good news, we built a [home affordability calculator]( to help you figure out how much you can afford based on your income and savings! But keep reading to understand the nuts and bolts of how your budget is determined. Understanding your debt-to-income ratio (DTI) In simple terms, your DTI is the balance between your income and your debt. It helps lenders understand how safe or risky it is for them to approve your loan. A DTI ratio represents how much of your gross monthly income is spoken for by creditors, and how much of it is left over to you as disposable income. It’s most commonly written as a percentage. For example, if you pay half your monthly income in debt payments, you would have a DTI of 50%. Of course, there’s a little more to calculating your DTI than just that. You’ll want to include any future or estimated monthly housing expenses, student loans, personal loans, auto loans and/or minimum required credit card payments as debts. For your income,you'll want to include your pre-tax monthly salary (determined by dividing your annual salary by 12), income from additional jobs, revenue from rental property or other investments, regular income from annuities, trust funds, and retirement accounts and/or any child support or alimony payments you receive. Once you’ve gathered those numbers you can calculate your DTI using this simple formula: [graph]( Here’s an example of what calculating your DTI might look like: [calculator]( Determining your down payment amount Down payments are not one size fits all. Despite the common belief that you are required to put down 20% on your home, the typical down payment for first-time buyers has ranged between six to seven percent since 2018!³ Ultimately, your down payment amount should be based off of your unique situation, but here are a couple of pointers to keep in mind while you’re determining what works for you: - You’ll pay your down payment upfront, in addition to your closing costs. Make sure you take the cost of getting your mortgage into account, which is typically between 2-5% of your home’s purchase price.⁴ - Down payment requirements vary based on the type of mortgage you take out, so make sure you do your research to understand what requirements will look like for you. - Government-backed mortgages such as an FHA loan have some of the lowest down payment options available. On the other hand, if your home is priced above the conforming loan limit you’ll need a jumbo mortgage which may have a higher down payment requirement. - The minimum downpayment required on a conventional mortgage loan is 5% — and 3% if you’re a first-time homebuyer. In 2022, homebuyers paid an average of 13.6% as a down payment.⁵ - While it often makes to put down 20% in order to avoid PMI, it can make just as much sense to put less than 20% down if that’s what you can afford. This way, you start building equity sooner, instead of waiting until you have 20% saved up for a down payment. Calculating your projected monthly mortgage payments Understanding your DTI can help you gauge what you may be able to afford as your monthly mortgage payment. You should aim to keep your housing costs below 30% of your monthly income, and your total debts below 50%. As a homeowner, your housing costs should include your mortgage payment, property tax bill, homeowners insurance premiums, HOA fees (if applicable), and home maintenance costs for safe measure. A good way to calculate your projected monthly mortgage payment is to work backwards. Let’s use an example: [graph]( Now let’s assume that you have $1,000 in monthly debt, which leaves you $3,166 left over for housing. You could afford about a $445,000 home with a down payment of $89,000. That’s assuming a 7.0% interest rate, $2,368 in monthly principal & interest, $430 on property taxes, $132 on homeowners insurance, $132 on HOA fees, and $100 in utilities in zip code 10118 for a monthly payment of $3,162. The goal is to make sure your monthly mortgage payment keeps your DTI under 50%. If you’re interested in doing your own homework, give our [mortgage calculator]( a try to see what the monthly payment on different home prices would look like for you. *The scenario above includes example numbers. Pricing may vary based on interest rate, property tax, and homeowners insurance, and HOA costs. --------------------------------------------------------------- Better Mortgage Interested in getting verified? We can help [Get a verified approval in 24 hours with Better Mortgage.⁶]( --------------------------------------------------------------- Press play Follow us on social to stay up to date with the latest mortgage tech, tips, and tools: Watch on [TikTok]( • [Instagram]( • [YouTube]( • [Facebook]( --------------------------------------------------------------- Better Mortgage Questions? Connect with a mortgage expert now [Apply today]( --------------------------------------------------------------- Quiz What is the minimum down payment requirement on a VA loan? - 0% - 3% - 7% - 20% [Better] [Better] [social]( [social]( [social]( [social]( [social]( ¹ Source: [LendingTree]( ² Source: [Moneywise]( ³ Source: [National Association of Realtors]( ⁴ Source: [Bankrate]( ⁵ Source: [Realtor.com]( ⁶ See [One Day Verified Approval Terms and Conditions]( © 2023 Better Home & Finance Holding Company and/or its affiliates. Better is a family of companies. Better Mortgage Corporation provides home loans; Better Real Estate, LLC and Better Real Estate California Inc License # 02164055 provides real estate services; Better Cover, LLC sells insurance products; and Better Settlement Services provides title insurance services; Better Connect, LLC dba Better Attorney Match provides real estate attorney connection services; and Better Inspect, LLC provides home inspection services. All rights reserved. Home lending products offered by Better Mortgage Corporation. Better Mortgage Corporation is a direct lender. NMLS #330511. 3 World Trade Center, 175 Greenwich Street, 57th Floor, New York, NY 10007. Loans made or arranged pursuant to a California Finance Lenders Law License. Not available in all states. Equal Housing Lender [Equal Housing Lender]. [NMLS Consumer Access]( BETTER MORTGAGE RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS, PROMOTIONS AND BENEFITS AT ANY TIME WITHOUT NOTICE. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. Alaska Mortgage Broker/Lender License (#AK330511); Alabama Consumer Credit License (#22548); Arkansas Combination Mortgage Banker-Broker-Servicer License (#114738); Arizona Mortgage Banker License (# 0942146); CA Dept. of Business Oversight - Finance Lenders Law License (#6052748); Loans made or arranged pursuant to Mortgage Company Registration with the Colorado Division of Real Estate (#330511); Connecticut Mortgage Lender License (#ML-330511); District of Columbia Mortgage Dual Authority License (#MLB330511); Delaware Lender License (#026589); Florida Mortgage Lender License (#MLD1484) Georgia Mortgage Lender License (#43354); Iowa Mortgage Banker License (#2018-0056); Idaho Mortgage Broker/Lender License (#MBL-2080330511); Illinois Residential Mortgage Licensee (#MB.6761046); Indiana DFI Mortgage Lending License (#330511); Kansas Mortgage Company License (#MC.0025544); Kentucky Mortgage Company License (#MC419058); Louisiana Residential Mortgage Lending License (#330511); Massachusetts Mortgage Lender License (#ML330511); Maryland Mortgage Lender License (#21438); Maine Supervised Lender License (#330511); Michigan 1st Mortgage Broker/Lender Registrant (#FR0020971); Minnesota Residential Mortgage Originator License (#MN-MO-330511); Mississippi Mortgage Lender License (#330511); Missouri Mortgage Company License (#19-2462); Montana Mortgage Lender License (#330511); North Carolina Mortgage Lender License (#L-162055); North Dakota Mortgage Broker License (#MB103296); Nebraska Mortgage Lender License (#330511); Licensed by the N.J. Department of Banking and Insurance (#330511); New Mexico Mortgage Lender License (#330511); Licensed Mortgage Banker - NYS DFS (#LMB-109666); Ohio Residential Mortgage Lending Act Certificate of Registration (#RM.804430.000); Oklahoma Mortgage Lender License (#ML011933); Oregon Mortgage Lending License (#ML-5310); Pennsylvania Mortgage Lender License (#46959); Rhode Island Mortgage Lender License (#20183669LL); South Carolina-BFI Mortgage Lender/Servicer License (#MLS-330511); South Dakota Mortgage Lender License (#ML.05201); Tennessee Mortgage License (#136757); Texas Mortgage Lender License (#330511); Utah Mortgage Entity License (#11448204); Vermont Lender License (#7618); Virginia Lender License (#MC-5863); Washington Consumer Loan License (#CL-330511); Wisconsin Mortgage Banker License (#330511BA); West Virginia Mortgage Lender License (#ML36354); Wyoming Mortgage Lender License (#3369); Nevada Mortgage Company License (# 5267) Better Mortgage Corporation, Better Real Estate, LLC, Better Settlement Services, LLC, Better Cover, LLC, Better Connect, LLC dbs Better Attorney Match, and Better Inspect, LLC are separate operating subsidiaries of Better Home & Finance Holding Company. Each company is a separate legal entity operated and managed through its own management and governance structure as required by its state of incorporation, and applicable and legal and regulatory requirements. Products not available in all states. Any unauthorized use of any proprietary or intellectual property is strictly prohibited. All trademarks, service marks, trade names, logos, icons, and domain names are proprietary to Better Home & Finance Holding Company. Better Home & Finance Holding Company trademarks are federally registered with the U. S. Patent and Trademark Office. Better Cover is a registered trademark with the U.S. Patent and Trademark Office and is owned by Better Cover, LLC. This email was intended for {EMAIL} [View this email online]( | [Unsubscribe](