5 practical ways to increase purchasing power when buying a home

Buying a house today can be an arduous task, especially when you consider the many challenges that families face. One of the most significant challenges is qualifying for a price that is affordable for the family. Heightened interest rates and high housing prices only add to the difficulty. However, there are a few factors that drive purchasing power. Here 5 ways to bump your buying power…

The most important of these factors is income. Income is the primary driver of purchasing power because it separates different purchase prices to mortgage payments. The more income you have, the more you can buy or borrow. Income is a significant factor in affordability because it is the key to owning a home. Without sufficient income, owning a home is often impossible. In this case, having a co-signer getting a raise or a new job can significantly increase your purchasing power. Example 100k of income = 550k purchase price on average.

Another significant factor that affects purchasing power is debt. Debt can significantly decrease your borrowing power, and it raises your debt-to-income ratio. For example, for every dollar of debt, $2 of income is needed to offset it. This means that if you have a car loan of $500 per month, you will need $1,000 per month of income to offset it. Paying off debt can dramatically increase your purchasing power. By paying off debt, you free up money that can be used toward a down payment or other expenses associated with buying a home. Another strategy to increase purchasing power is to pay points to lower the interest rate. This means that you pay more upfront to generate a lower interest rate, which subsequently leads to a lower monthly payment which in turn bumps your buying power.

A lower monthly payment means more purchasing power and greater opportunities to expand your home search. Finally, gift money from family can also be a valuable source of funds for increasing purchasing power. Anyone in your life, including parents, siblings, grandparents, uncles, cousins, or fiancé, can be a practical source of gift money. In conclusion, buying a house today can be challenging, but increasing your purchasing power can help. Factors such as income, debt, paying points, and gift money can all contribute to a higher purchasing power and more opportunities to find a home affordable for you and your family. By understanding these factors and developing a plan with an experienced loan officer, you can increase your purchasing power and achieve your dream of homeownership.

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