• Ron Goldan | 908.253.9700

Planning for Your Home Purchase

Investing in a home requires solid financial planning. Determining how much you can afford for a home can be a challenging process as it depends on multiple factors. Here are some things that will help you evaluate if you are eligible to purchase a home.


Annual Gross Income

To obtain an estimate of your home price, multiply your annual gross income by 2.5. If you make $60,000, you can afford a home of $150,000. Your debt, credit history, and current mortgage rates will make a difference on the home price range you can afford.

Credit History and Score

The credit history and score will make an impact on how much you can afford for a home. A low credit rating will hurt your ability to qualify for a mortgage. It is wise to spend time working on your credit rating for a few months to improve the qualification process. Review your credit history to see if there are negative factors that will hurt your ability to obtain a mortgage.

Current Mortgage Rates

Track mortgage rates to see when they are low. The mortgage rates change often based on the economy, and can impact your ability to find an affordable home loan.

Down Payment

To improve your ability to obtain a mortgage, you need to determine how much you can set aside as a down payment. Based on the mortgage loan you opt for, you will need to commit to 3.5% to qualify for the mortgage.


There are additional fees that are part of the mortgage loan that can change the affordability of your home loan. The costs for home appraisals, inspections, and closing costs are something that will increase how much you spend on the home.


What is your current lifestyle? Consider your current living standards and future expenses as they will factor into your ability to afford the home in the future.


The best thing potential home buyers can do is sit down and organize their finances. This will make meeting with the bank easier as they can go through the pre-qualification process quickly to let you know if you are eligible to invest in a home in the price range you desire. It is important to know lenders always focus on the following:

  • Debt to income ratio. All debts must be less than 30-40 percent of your monthly gross income

  • Housing expense ratio. The mortgage payment must be less than 28-30 percent of your monthly gross income

Use home buying calculators to help you create an estimate of your debt to income ratio to help you understand how much you can afford for a home.