During the process of buying a house, you might hear your lender or real estate agent use the term "price point." When you hear this term, it is important to understand what they are talking about, as it is an important part of buying a house. If you are ready to buy a house, it is important to educate yourself on the process, and as you do this, you should aim to understand what price point means in real estate.
Price point refers to your budget amount
Price point is a fancy way to refer to the budget you set for your home purchase. Your price point simply means the amount of money you are willing to pay for a house. If your budget is around $160,000, you might have a price point of $140,000 to $170,000. This would mean that you are limiting your search to homes within this price point but are giving yourself some room to move.
There are ways to calculate your budget amount
If you are buying a house for the first time, you should understand that determining your price point is one of the most important steps you will need to take. The price point you pick protects you and helps you avoid buying too much house. If you are not sure what your price point is, there are ways to determine it.
The first method you could use is a payment calculator, which is a tool you can find online. A second option is going to a bank and asking them to help you calculate it. A simple method you could begin with is multiplying 30% times your net monthly income. The answer to this will tell you a good approximate amount you could afford for your payments, and you could then determine how much house you could buy based on this amount.
The importance of sticking with your price point
Using several methods to calculate your price point is a great idea if you want to avoid being "house poor" after you buy a house and move in. It will help you choose the right amount to stick with, and this amount will be an amount that you can afford with the income you are currently working with.
Once you know your price point and are preapproved for a loan, you can meet with a real estate agent to begin working on finding the right home to buy.
To learn more or to start looking at single-family homes, contact a real estate agent.