Home prices in California rank among the highest in the country and they’re only going up. Combine that with rising interest rates and we’ve got a recipe for really expensive mortgage payments.
So… what can you do to put yourself in the best position?
Buying a home as soon as possible will prevent you from paying higher interest rates and allow you to shop in higher price ranges.
How do interest rates affect your purchase price?
Each loan program has guidelines that determine what you can afford based on their front end and back end debt to income ratios. As an example, if your monthly income is $5000 and you had a $1600 monthly mortgage payment, your front end debt to income ratio would be 32%. Unless your debts are paid off your debt to income ratio typically stays steady.
(Maximum front and back end ratios will vary by program. Check out our programs page for more information on requirements.)
As interest rates continue to rise your ratios will rise with them, which takes homes in higher prices ranges out of your budget.
Use a low down payment program
If the down payment is stopping you from purchasing a home, look into using a low down payment program. These can range from 3.5% down with an FHA loan to having your down payment taken care of by a Down Payment Assistance Loan.
If you’re a veteran you are entitled to a government backed VA loan that has no down payment.
Keep in mind you may need to have some money stashed away for things like inspections.
Buy a multi-family home
Buying a multi-family home is a good way to keep your monthly expenses to a minimum. You’ll want to find something that is four units or less. Renting these units out can help you to cover your mortgage payment and you can use the potential rent income towards qualifying.
These are just a few ideas to help overcome high cost housing. If you have questions we’re always here to help!