How much is my house worth?

When getting a home value estimate, consider the three main types of valuation:

  • Fair market value: Fair market value encompasses what your home looks like to prospective buyers compared to other homes in the area. Consider the sale price of a home that’s similar to yours (same number of bedrooms and bathrooms, square footage or outdoor space, say). If you work with a real estate agent to help you sell your home, this is where your agent will start: by looking at comps to gauge what buyers have been willing to pay for a property comparable to yours.
  • Appraised value: While the appraised value of your home factors in comps, it differs from fair market value. To calculate appraised value, a licensed appraiser considers the location, size and condition of your home, and any renovations you’ve completed. The appraised value is what mortgage lenders look at when a borrower buys a home or refinances their mortgage.
  • Assessed value: The assessed value is the assigned dollar value of your home used by local county tax assessors to determine property taxes. “Tax assessors calculate assessed value based on various factors, which may include the appraised value and the fair market value, as well as any home improvements, whether you generate income from the property, and any tax exemptions,” explains Jade Duffy, a Realtor with TXR Homes based in Carlsbad, California. Usually, the assessed value is lower than fair market value and doesn’t actually represent how much a property could sell for, Duffy says.

Bankrate insight While an online home value estimator can be helpful in getting a sense of what your house is worth, the number you see is only a starting point, not the final word.

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Next steps

If you’re beginning to consider buying a home, make sure you’re up to date on your credit report and score and then consider getting mortgage pre-approval, which can give you the financial confidence to be able to make a strong offer on the right house when you see it. Pre-approval is free and no-obligation, but lets you know whether you would likely qualify for the amount and interest rate you want.

How Much Mortgage Can I Afford?

Even though Martin can technically afford House #2 and Teresa can technically afford House #3, both of them may decide not to. If Martin waits another year to buy, he can use some of his high income to save for a larger down payment. Teresa may want to find a slightly cheaper home so she’s not right at that maximum of paying 36% of her pre-tax income toward debt.

The problem is that some people believe the answer to “How much house can I afford with my salary?” is the same as the answer to “What size mortgage do I qualify for?” What a bank (or other lender) is willing to lend you is definitely important to know as you begin house hunting. But ultimately, you have to live with that decision. You have to make the mortgage payments each month and live on the remainder of your income.

So that means you’ve got to take a look at your finances. The factors you should be looking at when considering taking out a mortgage include:

  • Income
  • Credit score
  • Existing debt
  • Down payment and savings
  • Mortgage term
  • Current interest rates
  • Private mortgage insurance
  • Local real estate market

Plugging all of these relevant numbers into a home affordability calculator (like the one above) can help you determine the answer to how much home you can reasonably afford.

But beyond that you’ve got to think about your lifestyle, such as how much money you have leftover for travel, retirement, other financial goals, etc. You might find that you don’t want to buy the most expensive home that fits in your budget.

Just because youre approved doesnt mean you can afford it

Because we didn’t include taxes and insurance, the calculator is conservative enough so that you could likely still be approved for a mortgage at this level after adding them in. That’s our goal: To give you a sense of the maximum home price and mortgage payment for which you might reasonably be approved with good credit.

Realistically, however, you should aim to keep the ratio of your mortgage payment as low as possible. The more money you aren’t spending on your home, the more money you have to save. This won’t be possible in all real estate markets, and it’s possible — if you live in Northern California or New York City, for example — that you may have to spend more than this calculator suggests to be able to buy at all.

Check out today’s mortgage rates

Interest rates vary depending on the type of mortgage you choose. See the differences and how they can impact your monthly payment.

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If You Sell A House As Is Through A Quick Cash Offer Company

“We buy houses for cash fast” companies are typically real estate investment businesses who purchase properties for a bargain price, perform the essential repairs, and then resell them for profit. 

You may get a quick cash offer with these companies, but there is always a catch. The majority of cash offer companies will make you an offer that’s 20-50% lower than your home’s market value. That’s a significant decrease in money you walk away with.

Types of Cash Offer Companies:

  • Local Cash Buyers: These can either be individual real estate investors or small businesses that will give you a quick cash offer. They’ll typically “fix and flip” homes, alternatively they can have the intent to convert the house into a rental property.
  • iBuyers: iBuyers are venture capital-backed businesses, they buy and sell properties online. They apply computer algorithms to estimate what your home is worth. 

How Much To Expect If You Sell Your House As Is Through A Cash Offer Company:

Because their goal is to make the most profit, you can reasonably expect to get an offer for a house valued at $150,000 from a cash offer company between $45,000-$75,000.

Home Affordability Calculator

The Rocket Mortgage® Home Affordability Calculator gives you the option to see how much house you can afford, or how much cash you need for your down payment and closing costs.

If you’re looking into how much home you can afford, just enter your location, yearly income, monthly debts and how much money you have for a down payment and closing costs. The calculator will take this information and tell you how big of a loan you can take.

On the flip side, if you have a price in mind, you can use the calculator to see how much cash you’ll need for a down payment and closing costs.

How Much Down Payment Do I Need?

Another key number in answering the question of how much home you can afford is your down payment.

The rule of thumb still stands: 20% of the home value is the ideal amount of money for a down payment. This amount buys you equity in the home, which helps secure the loan. When you don’t have a least 20% to put down, you have to find alternate means to secure the mortgage.

This can mean private mortgage insurance (PMI), which is an added monthly charge to secure your loan. If you don’t have enough money for a down payment, many lenders will require that you have mortgage insurance. You’ll have to pay your monthly mortgage as well as a monthly insurance payment, so it’s not the best option if your budget is tight.

You’ll stop paying PMI when your mortgage reaches about 78% of the home’s value. While certain homebuyers can qualify for little or no down payment, through VA loans or other 0% down payment programs, most homeowners who don’t have a large enough down payment will have to pay the extra expense for PMI.

The Bottom Line: Deciding How Much House You Can Afford

Ultimately, how much home you can afford depends on your financial situation and preferences. It requires a more comprehensive decision than just how much money you want to spend on mortgage payments each month.

Evaluate your full financial situation, your ability to pay off a mortgage and where you need to save for other things. Once you’ve done all that, it’s time to go after that perfect home.

A vital step in figuring out how much you’re able to spend on a home is seeking out mortgage preapproval. Get preapproved with Rocket Mortgage today.

Refinance

Refinance your existing mortgage to lower your monthly payments, pay off your loan sooner, or access cash for a large purchase. Use our home value estimator to estimate the current value of your home. See our current refinance rates and compare refinance options.

The Cost Of Selling A Home As Is By Owner (FSBO)

Making a choice to sell your own home on your own as is, can drive up the profit by saving a real estate agent’s commission, which can be as much as 5-6% of the value of your home. If your house is valued at $150,000, you could end up paying $9000 of your sale to the agent. 

This is in addition to making an outlay on repairs, lawyers costs, taxes and fees. Costs can mount up fast, and you want to avoid the unnecessary ones. If you are seriously considering this option, bare in mind that you need to do all the work that an agent does. That includes negotiations, paperwork and setting a fair price for your home. 

Here is the rundown of the costs for For Sale By Owner:

  • Home Warranty: Usually both newer and older homes are sold with a home warranty. This is a type of insurance contract that protects the buyer from making an outlay on unexpected repairs. 

It covers all the major systems in the home including the appliances, the roof, electrical systems, and heating, ventilation and air conditioning. Sometimes the buyer pays for this, but often it’s the home seller who fits the bill (costs $300-$800). Home warranties are often included in closing costs.

  • Closing attorney: A closing attorney is almost always in need to prepare documents  for selling your home. Their main role is to manage the financial transactions between buyer and seller. Their costs can be split between the buyer and seller. (Can often range $200-$500).
  • Paying the buyer’s agent commission: You may not decide to hire a realtor yourself, but you still need to pay the buyer’s agent commission. This can vary greatly in price.
  • Writing a sales contract: You can either buy a boilerplate contract on the internet (in some cases it’s free). Alternatively, if you want to get a real estate lawyer to put one together for you, it will cost you $200 plus.
  • Negotiation: If you are selling your own home, you may want to hire an attorney or real estate agent to negotiate the price and the terms of the contract with the buyer. This can easily cost $300 or more.

How Much To Expect If You Sell Your House As Is through For Sale By Owner FSBO:

FSBO is pretty labor intensive but as long as you’re careful, and manage cost, sellers can still do well enough. If you were to sell a home as is, valued at $150,000 through For Sale By Owner (FSBO) you could reasonably expect the high end price to be $134,700.  

Bottom line

No single home valuation method is guaranteed to be 100-percent accurate. That’s why using a combination of resources can help give you a more informed perspective of what your home is worth.

For example, you might get a free CMA and conduct your own research using an online home value estimator, as well as the FHFA calculator and county auditor’s website. Additionally or alternatively, you could pay for a professional appraisal. Averaging together all the final values you gather could give you a more accurate picture of your home’s value.

Ultimately, however, the most reliable home value estimates come from professionals who take the time to carefully assess your property based on a variety of factors.

“All of the evaluation tools are useful in giving an idea of the worth of your home, but an appraiser and/or an experienced agent will be the most accurate sources for determining value,” Krasow says. “A trained professional will have an advantage, as a computer cannot determine intrinsic value or consider the condition and improvements you’ve made to your home.”

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