Your home price estimate is not perfect, and it's not set in stone. Think about your home price estimate as a good starting place for deciding how much you can comfortably afford. You had to make some assumptions to get here. As you move forward and gather more information, you can go back and refine those assumptions. Try out different scenarios-for example, a different down payment amount-and make adjustments.
Your down payment affects how much you can afford. If your down payment amount is less than 20% of your target home price, you will likely need to pay for mortgage insurance. Mortgage insurance adds to your monthly costs. You may need to reduce your target home price accordingly if you plan to put less than 20% down.
The home price you can afford depends on four key factors. Change any one of these four factors, and you may be able to afford a more expensive or less expensive home:
- How much you can pay monthly
- How much you can pay upfront in a down payment
- The kind of loan you get, for example, a 30-year fixed, 30-year adjustable, 15-year fixed, etc.
- The interest rate and terms of your loan