Affordability 101

If you earn $56,516, the average household income, you can afford $1,695 in total monthly payments, according to the 36% rule. The rule, which measures your debt relative to your income, is used by lenders to evaluate how much you can afford.

Key factors in calculating affordability are 1) your monthly income; 2) available funds to cover your down payment and closing costs; 3) your monthly expenses; 4) your credit profile.

  • Income – Money that you receive on a regular basis, such as your salary or income from investments. Your income helps establish a baseline for what you can afford to pay every month.
  • Funds available – This is the amount of cash you have available to put down and to cover closing costs. You can use your savings, investments or other sources.
  • Debt and expenses – It’s important to take into consideration other monthly obligations you may have, such as credit cards, car payments, student loans, groceries, utilities, insurance, etc.
  • Credit profile – Your credit score and the amount of debt you owe influence a lender’s view of you as a borrower. Those factors will help determine how much money you can borrow and what interest rate you’ll be charged. Check your credit score.

We’ll provide you with an appropriate price range based on your situation. Most importantly, we’ll take into account all your monthly obligations to determine if a home is comfortably within reach.

It’s also important to plan for the future. Consider creating a savings plan for upcoming life events, such as having a child.

For more information about home affordability, read about the total costs to consider when buying a home.

When banks evaluate your affordability, they only take into account your outstanding debts. They do not take into consideration if you want to set aside $250 every month for your retirement or if you’re expecting a baby and want to set aside additional funds. NerdWallet’s Affordability Calculator helps you easily understand how taking on a mortgage debt will affect your expenses and savings.

Do you know what you want for a home?


One of the first logical steps in the home search process is narrowing down your true wants and needs in a home. Doing this simple exercise early in the process will help save you time and frustration during the search process.

Some major things to consider:

  • How many bedrooms/baths?
  • What neighborhood or area?
  • How close do you need/want to be to schools?
  • What is your price range?
  • How close to work?
  • How much square footage do you need?

You should also consider which features of the home might be required vs. nice to have. Things like:

  • Garage
  • Yard
  • Swimming Pool or hot tub
  • Walk-in closets
  • Fireplace

I_AM_WE_ARE sure you will find that spending a little time in advance thinking about these things is well worth it. I_WE would love to sit down with you and guide you through the exercise.

How else may I_WE_LC be of service in your home search? I_WE look forward to serving you in any way I_WE_LC  can. Please don’t hesitate to contact ME_US_LC.







Questions to ask Loan Officer


The mortgage loan process can be very confusing and stressful, so I_WE_LC thought I_WE_LC might take this opportunity to share some good questions to discuss with your lender when applying for a home loan:


  1. What kind of fixed-rate and adjustable mortgage loans available?
  2. How long can I “lock-in” the financing at the current interest rate and what is the lock-in policy?
  3. Is a float down lock available in case rates drop after I have locked-in?
  4. What are the other fees a lender may charge me in conjunction with my loan?
  5. Are funds for a second mortgage available?
  6. Is there a pre-payment penalty clause? This involves extra charges for paying off the loan before maturity. About 80% of all mortgage loans are paid off early.
  7. What is the “grace” period?
  8. How late can a monthly payment be made before a late charge is assessed?
  9. What will happen if a payment is missed?
  10. If you sell your house, will the new buyer (if he/she qualifies) be able to assume your mortgage at the same interest rate?
  11. Do you have to pay “points” to get your new mortgage? Usually lenders charge points for the cost of giving you a mortgage loan. A “point” is 1% of the loan.
  12. Will the lender require mortgage insurance?
  13. Is the loan serviced locally or is the servicing sold?
  14. What will the total closing costs be?


Questions on adjustable rate mortgages:

  1. How often will the interest rate be adjusted?
  2. Is there a maximum limit on each rate change?
  3. How often will the monthly payment be adjusted?
  4. Is there a ceiling on payment adjustments?
  5. Can the term of the loan be extended?
  6. What is the maximum rate that can be charged over the life of the loan?
  7. Is there any potential for negative amortization?
  8. What is the annual percentage rate?


Jaclyn Nelson


Before Buying, REALTORS Insist You do These 4 Things

Before Buying, Real Estate Pros Insist on Doing These 4 Things

What you really need to know about buying — from the people who house hunt for a living.


One house you’re looking at has the wraparound porch you’ve fantasized about, but it’s on a high-traffic street. The condo you like has a doorman in the lobby (you can order online now!), but it has no dedicated parking. What to choose?

It’s not every day that you buy a home and make decisions about the next three, five, or 10 years of your life. Since you can’t exactly take a home on a test drive, how do you decide? That got us to thinking about real estate pros. When they’ve seen practically everything on the market, how do they choose?

Four pros who’ve seen it all share their advice and their stories of hunting for just the right home.

Compromise for Your Priorities

Veteran real estate agent Nancy Farkas knew exactly what she wanted in her home: ranch style, three bedrooms, high ceilings. But you know what she bought? A two-story Colonial.


For Farkas, an associate partner with Coldwell Banker Heritage REALTORS®, in Dayton, Ohio, the home’s location and price trumped style. “I had a dog I had to go home and walk at noon, and the house was close [to work] and the right price,” she says.

Her advice: Make sure your practical and functional priorities don’t get lost in all the home buying hoo-ha (sparkling granite counters, new hardwood floors, a steam shower!). Remember, you can always add the hoo-ha, but you can’t make a home fit all priorities, such as location and price.

Dig Into the Details (Dull, Yes, But Worth It!)

When Grigory Pekarsky, co-owner and managing broker with Vesta Preferred Real Estate in Chicago, was looking for his first home, one of his priorities was to minimize his maintenance costs. He made sure to find out if the house had a newer roof, good siding, and a newer furnace. But he recommends you go even deeper to uncover a home’s not-so-obvious maintenance costs:

  • Scope out the sewer line — especially if you’re interested in an older home — to make sure there aren’t any tree branches or other debris clogging up the works. Otherwise, you might find some nasty sludge in the basement.
  • Look at the trees. How mature are they? Roots from older trees can invade the sewer line; untrimmed branches can pummel your gutters during storms.
  • Know what’s not covered by homeowners insurance. “I learned seepage isn’t covered. Shame on me,” he says.
  • Ask how old the appliances are. You might need to budget for something new in a few years. Sellers are only required to fix what the inspector finds is broken; they’re not going to upgrade working appliances for you.
Grigory Pekarsky opening his refrigeratorImage: Jacob Hand for HouseLogic

Seek a House That Matches Your Lifestyle

Having lived the high-rise apartment life as a renter, Pekarsky knew a single-family home was just what he wanted. He was tired of living in a relatively small space with no yard. He wanted a house he could “grow into in the next three to five years.” That meant multiple bedrooms and bathrooms for the family he plans on having. So what he bought — a three-story, single-family with a finished attic bedroom (shown below) on Chicago’s North Side — suits his lifestyle perfectly.

Grigory Pekarsky in his bedroom with his dogImage: Jacob Hand for HouseLogic

In addition, “you get the biggest value from owning the land,” he says. “In a single-family [home], people aren’t telling you what to do with the investment.”

On the other hand, Matt Difanis wished he’d bought a condo when he bought his first home, a small bungalow ranch in a charming, historic neighborhood in Champaign, Ill. It was first-home love — until it rained.

“If I didn’t clean out the gutters before every rainstorm, the basement would leak,” says the broker-owner of RE/MAX Realty Associates in Champaign. He didn’t realize that taking care of a single-family home wouldn’t be his cup of tea. “I should have opted for a condo without gutters to clean and a lawn to mow,” he says.

Agent Amy Smythe Harris of Urban Provision REALTORS®, in Woodland, Texas, bought a home with a sizable downstairs suite her parents could use now (and she could use years from now). She says her millennial clients aren’t forward-thinking about their lifestyles. Some are childless and say they don’t care about schools, pools, and tennis courts. Then they become parents a few years later and have to move.

“Once they have kids, the first question [they] ask is about school districts, and the second is about where the parks and pools are,” she says.

The pros’ bottom-line advice: Think of your lifestyle preferences and how those might change in the next few years. After all, the typical homeowner lives in a house for a median of 10 years before selling, NATIONAL ASSOCIATION OF REALTORS® data shows.

Look at the House Through the Lens of Resale

All the real estate pros we talked to — no surprise here — emphasized resale. Take appraiser Michelle C. Bradley of Czekalski Real Estate Inc. in Natrona Heights, Pa. When she built her current home — a 2,200-square-foot ranch — she included a full, unfinished basement, even though she has no use for one and rarely ventures into it.

Why would she do that? Because basements are standard in her southwest Pennsylvania market. But Bradley’s not going to finish the basement until she’s ready to sell. That way, she avoids having to clean it and ensures she’ll install the most fashionable bathroom fixtures at sell time.

Her advice: “Don’t buy or build something unique that you can’t resell. If you’re not in an area with log homes, don’t choose a log home. If you’re not in an area with dome homes, don’t choose a dome home.”

Likewise, If you buy a home priced higher than average for the area, it’ll be difficult to resell at a higher price.Read More InBuy Your First Home in One Year: A Step-by-Step Guidedon’t buy a home that’s not in line with the neighborhood’s average price . When you go to resell, you’ll find yourself in an uphill battle to maintain your higher price.

Other advice from the pros: Watch out for unfixable flaws that could affect resale, like:

  • What’s next to the home, such as vacant land that could be developed, high-traffic businesses, noisy power generation stations, a cell tower, etc.
  • Lot issues, such as a steep driveway that could double as a ski slope in winter, or a sloped yard that sends water special delivery to your foundation.

Of course, a home isn’t just about resale. It’s just one factor to consider. Remember the first point: Be willing to compromise for your priorities. If the home meets your priorities and you’re going to stay there awhile, then resale might be where you compromise.

Related: Are You Making a House-Hunting Etiquette Mistake?

Christina Hoffmann also contributed to this story.

Home Buying Steps


New car smell has nothing on the feeling you get when unlocking your home’s front door for the first time. But the process of reaching that euphoric moment? Well, it can feel like you’re navigating an obstacle course designed by the producers of “Survivor.” So we’ve mapped out the steps to buying a house — and enlisted seasoned homeowners and real estate pros to share tips for finding the right home at the best possible price.