Down Payments are the Only Up-Front Cost

Not True.  As nice as it is to think the only money you need is your down payment, it’s important to keep closing costs in mind.  Buyers can expect to pay 3% – 5% of the loan amount in closing costs.  This is an important consideration.  Additionally, don’t forget to consider the home inspection fee.  There are also moving costs to consider.  And remember to keep some money for potential emergencies and unknown expenses.

How Much Home Can You Afford?

Factors to use to determine how much home you can afford:

  1. Credit Score – The higher your credit score, the more likely you’ll qualify for a lower interest rate
  2. Interest Rate – The lower your interest rate, the more money you can borrow at the same monthly loan payment amount
  3. Down Payment – The more money you can pay up front, the less your loan amount is. If your down payment is 20% or more of the property price you will not need to pay mortgage insurance, resulting in lower monthly payments
  4. Debt-to-Income Ratios – There are two debt-to-income rations that are used to determine your maximum loan amount:
    1. Housing ratio (front end ration) is the percentage of your gross monthly income that is dedicated to paying your monthly mortgage related expenses (principal and interest, property taxes, homeowner’s insurance, mortgage insurance). Generally, this ratio should be 28% or lower.
    2. Total debt ratio (or back-end ratio) determines that percentage of your gross monthly income that is used to pay your combined monthly debts (mortgage related expenses, credit cards, car loans, student loans, child support, etc.). Generally, this ratio should be 36% or lower.


For more information, contact Penny at (206) 618-5123 or email me at

Serving:  Bainbridge Island, Poulsbo, Silverdale, Kingston, Bremerton, Port Orchard, Port Ludlow and Ocean Shores.

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