Buying a home is exciting, but knowing how much you can afford depends on several key factors. Let’s break it down:
Consider both one-time upfront costs and ongoing monthly expenses. Upfront costs include your down payment and closing costs. Monthly costs cover mortgage payments, property taxes, insurance, and utilities. Balancing these is crucial for determining your budget.
Lenders look at your income, debt, expenses, credit score, and payment history to decide how much house you can afford. They use financial ratios to gauge your ability to repay the loan and assess your overall financial stability and creditworthiness.
A home affordability calculator helps you estimate your housing budget, explore different financial scenarios, and plan for homeownership within your means.
Your income plays a major role in determining how much house you can afford. Lenders use it to calculate your debt-to-income ratio, which helps them gauge your ability to make mortgage payments. A higher income typically means you can afford a more expensive home.
Your debt-to-income ratio (DTI) plays a key role in determining how much house you can afford. Lenders use it to evaluate your ability to take on more debt. A lower DTI means you can afford a higher-priced home, while a higher DTI might limit your options. Keeping your DTI within an acceptable range is crucial.
Formula for calculating your debt-to-income (DTI) ratio:
(formula)
Here’s an example of how to calculate your DTI:
Debts
Income
DTI Calculation: ($2,460 / $6,350) x 100 = 38% DTI
Your credit score shows lenders how reliable you are with credit and affects the interest rate you receive. A higher score can lead to lower rates, allowing you to afford a more expensive home. Conversely, a lower score might result in higher rates or even a declined mortgage application.
Your down payment plays a key role in determining how much house you can afford. It’s the upfront amount you pay, usually between 3% and 20% of the sale price. A larger down payment reduces your mortgage balance, lowers monthly payments, and could even secure a better interest rate, allowing you to afford a more expensive home.
Your mortgage interest rate is crucial in determining how much house you can afford. A higher rate leads to higher monthly payments, limiting your mortgage amount. On the other hand, a lower rate increases your purchasing power, allowing you to afford a more expensive home. Your rate directly influences your monthly budget and homeownership possibilities.
How your interest rate impacts your monthly mortgage payment:
To figure out your monthly mortgage payment, consider your debt-to-income ratio (DTI). Ideally, your mortgage and other debts shouldn’t exceed 50% of your monthly income. It’s also smart to keep 3-6 months of savings as a cushion for unexpected expenses or income changes.
Lenders typically use the 36/43 rule to determine affordability. This means your monthly mortgage costs (including property taxes and insurance) should be no more than 36% of your gross monthly income, and your total monthly debt (including mortgage payments, car loans, etc.) should not exceed 43% of your pre-tax income. For example, if you make $5,000 a month, you can afford a mortgage payment up to $1,800, with total household expenses not exceeding $2,150.
FHA loans typically follow a 31/43 rule, meaning your monthly mortgage payments should be no more than 31% of your pre-tax income, and total monthly debt should stay under 43%. If you earn $5,000 a month, your mortgage payment should be no more than $1,550, with total debt up to $2,150. FHA loans often allow lower down payments and credit scores, but remember, the lower your credit score, the higher your interest rate may be.
VA loans offer benefits like no down payment and no PMI, making them a great option for veterans and active military. Your mortgage and other monthly debts should not exceed 41% of your income. For example, with a $5,000 monthly income, your housing payment can be around $2,050. Use a VA loan calculator to see how much home you can afford.
An affordability calculator is a great starting point, but your comfort level matters most. Consider your monthly spending habits, savings goals, and cash reserves after purchasing a home. Aim to have at least three months of house payments in savings, plus enough to cover other debts. Ask yourself:
Preparing to buy a home with an FHA loan involves several key steps:
Use Kassa’s FHA loan calculator to see how your payments will look and to explore the benefits of making additional payments.
FHA loans require that your monthly mortgage payment doesn’t exceed 31% of your gross monthly income (before taxes). For instance, if your household earns $75,000 annually, your FHA loan payment should be no more than $1,937.50 per month.
Additionally, your total debt—including car loans and student loans—should result in a debt-to-income ratio (DTI) of no more than 43%. This limit can be higher if you have strong compensating factors like significant savings or additional income.
Use our FHA loan calculator to check if your potential home falls within these limits. Remember, just because you qualify for a certain amount doesn’t mean you should borrow the maximum. Choose a payment that comfortably fits your budget, factoring in other expenses like utilities and maintenance.
An FHA loan amortization schedule shows how your monthly payments are divided between the loan’s principal and interest over time. Early on, most of your payment goes toward interest, but as time passes, more goes toward reducing the principal.
To build equity faster, you can make extra payments directly to the principal. Just be sure to check with your lender to ensure the payments are applied correctly.
Use Kassa’s loan amortization calculator to see how your FHA loan payments break down and explore the benefits of making additional payments.
FHA loans, backed by the Federal Housing Administration, make homeownership more accessible with low down payments and flexible credit requirements, especially for first-time buyers.
With our FHA loan calculator, you can estimate your monthly payment based on key factors like the home price, down payment, and other costs. Keep in mind, actual costs may vary by lender.
Here’s what you’ll need:
Use our FHA loan calculator to get a clearer picture of your potential monthly payments, and factor in these details when planning your budget.
First-time homebuyers often overlook the various costs involved in homeownership. Here’s what makes up your monthly FHA loan payment:
If your FHA loan payment is higher than you’d like, consider these tips to reduce it:
A VA loan is a mortgage option partially backed by the U.S. Department of Veterans Affairs (VA). It’s designed to help eligible veterans, active-duty service members, and their families purchase, build, repair, or refinance a primary residence, often with favorable terms like no down payment and competitive interest rates.
Eligible candidates include:
To qualify for a VA-backed loan, you may need to meet additional standards like suitable credit, sufficient income, and a valid Certificate of Eligibility (COE). Find a VA lender near you to get pre-qualified for a VA loan.
The VA offers four main types of loans: three VA-backed loans and one VA direct loan.
VA-backed loans are seen as less risky by lenders, making it easier for you to secure favorable mortgage terms. Key benefits include:
VA loan limits refer to the amount the VA guarantees to pay your lender if you default, not the maximum amount you can borrow. As of 2020, eligible borrowers with full entitlement have no VA loan limits. This means the VA guarantees up to 25% of loans over $144,000 if you default. You have full entitlement if:
If you have remaining entitlement, your VA loan limit depends on your county’s loan limit. You might have remaining entitlement if:
With remaining entitlement, the VA covers up to 25% of your county loan limit minus the amount of entitlement already used. You can use this remaining entitlement alone or combine it with a down payment for another VA loan.
Most VA loan borrowers, including veterans, active-duty service members, and National Guard and Reserve members, are required to pay a one-time funding fee. This fee helps keep the VA loan program running and lowers costs for taxpayers. Some veterans with service-related disabilities may be exempt. The funding fee can be paid upfront at closing or rolled into your loan. Here’s a breakdown of the VA funding fee rates based on the type of loan:
Nota: Los detalles específicos de las tasas de la tarifa de financiación (funding fee) se encuentran en la documentación oficial del VA. Por favor, consulta el sitio web del VA o comunícate con un especialista en préstamos VA para obtener las tasas exactas.
Kassa’s VA loan calculator helps you quickly estimate your monthly mortgage payment, including principal, interest, taxes, and insurance (PITI). Here’s how to use it:
Mortgage refinancing involves replacing your current loan with a new one that better aligns with your financial needs. The new loan pays off your existing mortgage.
Just like when you first applied for a mortgage, you’ll need to gather documents like recent pay stubs, W-2s, and bank statements. You’ll also need details about your current mortgage, including the remaining balance, loan term, and interest rate. This information helps you and your lender find the best refinancing option for your situation.
Explore the most common reasons to consider refinancing your mortgage.
Reducing the interest rate is the most popular reason to refinance. If you qualify for a lower rate than your current mortgage, refinancing can lower your monthly payments and potentially save thousands over the loan’s life.
Refinancing lets you change your loan type. For example, switch from an adjustable-rate mortgage (ARM) to a more stable fixed-rate mortgage if your ARM rate is about to increase.
If you purchased your home with less than a 20% down payment, you likely pay private mortgage insurance (PMI) or a mortgage insurance premium (MIP) with FHA loans. If you’ve gained at least 20% equity, consider refinancing to cancel mortgage insurance and save on monthly payments.
Shortening your loan term allows you to pay off your principal faster. This means higher monthly payments but fewer total payments, reducing interest over the loan’s life. Shorter-term loans often have lower interest rates than longer-term loans.
You can also speed up repayment with bi-weekly payments, which equate to one extra payment per year, reducing your loan term by about 51 months on a 30-year loan. Confirm this option with your lender.
Refinancing usually resets your mortgage term to 15 or 30 years, spreading your principal balance over more payments and lowering monthly costs. A cash-in refinance can reduce payments further by applying a lump sum to your balance.
If you have enough equity, a cash-out refinance lets you refinance for more than you owe and keep the extra cash. Use it for home projects or paying off high-interest debt. Note that cash-out refinances typically have higher interest rates. Use the “advanced settings” on the refinance calculator to convert it to a cash-out refinance calculator.
Refinance closing costs usually range from 2%-6% of the loan amount and vary by location, loan type, size, and lender.
Most lenders let you roll these costs into your new loan balance, increasing the total amount borrowed. Apply with at least three lenders and get official Loan Estimates to compare costs and savings. Work with lenders to complete a cost-benefit analysis and see if refinancing is right for you.
Here is a list of common refinance fees you might see associated with your refinance loan:
To calculate your refinance savings, compare your current loan’s monthly payment with the proposed new payment. Use an amortization schedule to see the principal balance of the new loan after the same number of payments as your existing loan. Both the new payment and principal balance should be lower. Enter your details into the refinance calculator above for a detailed breakdown of your savings.
Refinancing makes sense if the savings on interest over the loan’s life outweigh the costs of getting the new loan. Keep an eye on refinance rates and use Kassa’s free refinance calculator to see if it’s the right financial move for you.
Refinancing is often done to lower monthly mortgage costs, but it’s important to consider the full picture. A mortgage’s monthly cost includes more than just principal and interest—use our mortgage calculator to see it all. Timing is crucial when refinancing.
Refinancing involves upfront costs, so ensure you’ll keep the new mortgage long enough to recoup those expenses and then benefit from the savings. For example, refinancing and then selling your home within a year might not make sense, as you wouldn’t have recouped the costs.
Refinancing typically costs between 2%–5% of your loan amount. Make sure to factor this into the “Cost of refinance” section of our refi calculator to get a clear view of your potential savings.
You can refinance your home as many times as you’d like, though some lenders may have their own restrictions. Always use a refinance calculator to understand the long-term costs or savings each time you refinance.
Typically, a credit score of 620 or higher is required to refinance, but scores of 740 or above will get you the best interest rates. The higher your score, the lower your rate. Use the calculator to see if it’s worth improving your credit before refinancing.
You’ll generally need at least 20% equity to cancel mortgage insurance, but the exact requirement varies by loan type. Rate-and-term refinances usually have fewer equity restrictions than cash-out refinances.
This type of refinance rolls your closing costs into the loan, so you don’t pay upfront. However, this increases your total loan amount and monthly payments.
Refinancing typically involves these steps:
Learn how to save for a down payment, boost your credit score, make smart offers, and more. Our friendly course lets you work at your own pace. Complete the modules, pass the assessment, and earn your certificate. Build confidence as you move closer to owning your home.
Our homeownership education course, completion certificate, and all associated resources are available free of charge.
The course, checklist, glossary of terms and course evaluation are available in both Spanish and English.
Complete Tu Kassa course at your own pace. Pause anytime and pick up right where you left off when you return.
Tu Kassa Learning Plan is structured so that each module builds on the previous one. You’ll need to complete the modules in order.
To earn your certificate of completion, you must first complete all seven modules. Only then will you be able to access the final assessment.
Once you complete Tu Kassa course and score 80% or higher on the final assessment, you’ll get a certificate of completion. This certificate meets the homeownership course requirement. Your lender will guide you on how to submit the certificate.
Your certificate includes a completion date but doesn’t expire. However, lenders may have their own rules on how long certificates are valid. Check with your lender or program administrator for specific details.
You can take the final assessment as many times as needed. A score of 80% or higher is required to earn your certificate of completion.
Housing counseling is a great way to meet the homeownership education requirement. It’s perfect for homebuyers wanting personalized guidance or extra help understanding the homebuying and lending process. We can help you out!
Down Payment Assistance (DPA) programs are designed to help first-time home buyers with financial aid for upfront costs like down payments, closing costs, and more. These funds can come as grants or loans, easing the path to homeownership for buyers with limited savings. While often perceived as “free” money, DPA funds typically need to be repaid over time through loans or taxes. These programs are offered by government agencies, lenders, and nonprofits, each with its own qualifications and restrictions.
Navigating DPA programs can be tricky, but we're here to simplify the process and help you access these valuable resources.
Down payment assistance programs come from the government, banks, and nonprofits to help cover the costs of buying a home. Your lender can guide you through these programs as you apply for your mortgage.
Working with a lender who knows local programs can make things easier and improve your chances. It’s also smart to do your own research and talk with your lender about your options. Together, you can make a plan to help you buy your home.
Many people qualify for down payment assistance, with over 2,000 programs available nationwide. Eligibility depends on specific factors like location, profession, and more. Here’s what to consider:
Common Qualifying Factors:
Meeting these criteria can help you qualify for down payment assistance. Explore your options to find the program that works for you.
Absolutely! Kassa offers several ways to help you secure down payment assistance:
1. Connect with specialized lenders
We’ll connect you with lenders who specialize in DPA programs. These experts know the best options in your area and can help turn your homeownership dream into reality.
2. Explore various assistance programs
Based on your needs, we’ll guide you through different assistance programs to find the one that fits you best.
The time it takes to receive your down payment assistance can vary based on several factors, such as the specific program, your lender’s speed, how organized you are with paperwork, the time of year, and your location.
To speed up the process, focus on what you can control. Stay organized, keep up with paperwork, and respond quickly to your lender’s requests. The more on top of things you are, the smoother the process will be.
While many lenders know DPA programs well, doing your own research can help too. Teaming up with your lender can help you get your down payment assistance faster.
Yes, sometimes! The Federal Housing Administration (FHA) works with housing finance agencies to offer FHA loans to homebuyers who need extra help with a down payment. In some cases, you can even combine multiple assistance programs. However, whether you can get additional help depends on the specific FHA loan and your unique situation.
Yes, foreigners can own property in Mexico through a fideicomiso, a 50-year renewable trust. This trust allows seamless long-term control of the property, including rights to sell, improve, or pass it to heirs.
Absolutely! Foreigners can buy beachfront property through a trust, complying with Mexican regulations that restrict direct ownership near the coast and borders.
Mexican law restricts non-citizens from directly owning property within 50 km of the coast or 100 km of the border. A fideicomiso (trust) allows you to legally own such property.
No, a trust is only needed for properties within the restricted zones near the coast and borders.
You’ll have similar rights as in the U.S., including the ability to use, rent, sell, and improve your property.
To qualify, you need at least a 15% down payment, a good credit history in your home country, and verifiable stable income. The pre-qualification process is quick and fully online.
Loan amounts range from $250,000 to $2.5 million USD, up to 65% of the property’s appraised value. The exact amount depends on your financial situation.
Yes, while our process is tailored for Americans, we also offer loans to citizens of various other countries. Processing may take slightly longer, and additional documentation may be required.
We can fund your loan once the property is ready for delivery. For financing down payments on pre-sale properties, you’ll need to explore other options.
No, only completed, habitable residential properties, including condos, single-family homes, and certain mixed-use properties can be financed.
You can sell your property to anyone, usually without restrictions. If you have a mortgage, it will be paid off during the sale, similar to how it works in the U.S.
No, you have the right to renew the trust for another 50 years indefinitely, ensuring long-term control of your property.
An apostille authenticates the notarization and certification of documents for use in a foreign country. You might need one if you choose to vest your property in an LLC, trust, or corporation.
The Public Registry is where land titles and ownership records are kept, similar to a County Recorder’s Office in the U.S. It ensures that property transactions are clear of liens and the seller has the legal right to sell.
A fideicomiso is a trust that allows foreigners to own property in restricted zones near the coast and borders. The bank holds the title but cannot use or claim the property. The trust lasts 50 years and is renewable indefinitely.
A Notario Publico oversees legal property transactions, ensuring all documents are properly executed and that taxes are collected and forwarded to the authorities.
An escrow account is used to securely hold funds during the property transaction, ensuring that the transfer of ownership occurs as agreed.
Yes, title insurance is recommended to protect against future claims on the property, which are more common in Mexico than you might expect. Title insurance policies are issued only after an extensive title search is completed on the subject property, and is part of the loan process.
Typically, the buyer covers most closing costs, including transfer taxes and notary fees, while the seller covers capital gains tax and broker commissions.
Closing costs typically range from 5-10% for purchases, and are generally lower for refinances. Property taxes in Mexico are usually much lower than in the U.S.
Yes, capital gains taxes apply to property sales in Mexico, consistent with global tax practices.
You may be eligible for U.S. tax credits for taxes paid in Mexico due to the U.S.-Mexico treaty against double taxation.
No, the property in a fideicomiso is not the bank’s asset. If the bank faces financial difficulties, the property is transferred to another trustee bank.
Yes, cash-out refinancing is available, allowing you to borrow up to 60% of the property’s appraised value.
Unlike many other real estate websites, Kassa doesn’t allow agents to advertise on our platform. Our recommendations are purely data-driven, based on historical performance, ensuring transparency and objectivity in every match we make.
Kassa uses real sales data, client reviews, and AI to identify the best real estate agent for you. Agents earn our recommendation by consistently delivering exceptional results. With thousands of transactions analyzed, we connect you with top agents based on their proven skills and experience.
The top 5% of buyer’s agents typically save clients thousands on their home purchases, securing better deals than average agents.
Nope, agents can’t buy ads or better placement on Kassa. They can only improve their rankings by delivering great service, handling more transactions, and boosting their stats. Our recommendations are transparent, performance-based, and data-driven to ensure objectivity.
When you complete a transaction with a Kassa-recommended agent, they pay us a standard referral fee. This common practice saves agents time and money on client acquisition. It means Kassa is free for you, providing unbiased information. We only earn when you succeed, so our goals align with yours to find the perfect agent.
Nope, finding an agent through Kassa Agency is completely free, and there’s zero commitment needed. How awesome is that?
Real estate is personal, and online forms can only capture so much. By understanding your unique situation, goals, and personality, we can refine your search and ensure you have the best experience with the agent we recommend. Speaking with you helps us find the perfect fit.
You’re not obligated to work with the agents we recommend. Our aim is to provide transparency and performance-based recommendations, empowering you to make the best decision for your needs.
Absolutely! If you’re unhappy with your current agent or just curious to see how they stack up against top agents in your area, we encourage you to explore your options.
Kassa is an excellent platform for real estate agents to showcase their skills and generate more referrals. In a world where consumers expect transparency and detailed information about services, Kassa connects people with the right agents while giving those agents a space to demonstrate their value.