San Diego Homes Buyer tips: How much house can I afford?

San Diego housing affordability

Before you go out looking for a home, you can get an idea of how much real estate you can afford by using our mortgage calculators. This handy tool will help you estimate how much mortgage payment you can handle.

Another thing to consider is your down payment amount. Think you can’t buy a house without a 10% or 20% down payment? Thanks to government FHA guidelines and new home loan products, some people can now get into a house for as little as 3.5% down or even less. There are even some special programs for first-time buyers that help you with closing costs.

The Benefits of Equity (Home Ownership)

Equity is the difference of the actual value of your real estate property and the mortgage balanve that you owe in that property. You can use your home equity as a down payment on a new home, or collateral for a home equity loan. You can also use a home equity loan to finance home improvements, a child’s college tuition, or a new car.

Real estate is also a great way to keep a hedge against inflation. While some homes do appreciate in value more quickly than others, real estate usually keeps pace with inflation. In fact, San Diego homes in general have been appreciating at a 5% – 10% a year. (Our REALTORS® can provide you with the housing appreciation rates in the areas in which you’re interested in buying.)

Real Estate and Tax Breaks

As a homeowner, when filing your taxes you can deduct the interest portion of your monthly payment. That can mean big savings. You can also deduct your property taxes.

So look at what your monthly mortgage payment will actually be, taking your tax breaks into consideration. You may find out it’s about the same as – or sometimes even less-than a rent payment!

With a 5% down payment, a $100,000 30-year mortgage loan at 8% interest (8.15% APR) requires a monthly principal and interest payment of $733.76. Assuming a 28% tax bracket and $150 for monthly property taxes, the after-tax monthly payment would be about $615! (This is only an example. Please consult with a tax advisor regarding your own tax situation and current tax laws.)

Pre-Qualification vs. Pre-Approval

Pre-qualification is just a guesstimate of how much you could afford. But with a pre-approval, it’s just that: getting your mortgage approved prior to going out and looking for a new home.

Your loan officer will show you which items you should bring to apply so neither of you will need to wait for various written income, asset and liability information. So you could get a loan decision in just days. And when you apply online you can get your approval quickly!

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