The Three Numbers That Actually Determine Whether a Home Purchase Works

Most buyers focus on purchase price. That is the number they see on the listing, the number they negotiate, and the number they tell people when they talk about what they bought. But purchase price is only one of three numbers that determine whether a home purchase actually works for a buyer's life. Shelby Pennix wants every buyer to understand all three before they start shopping.

Number One: Purchase Price

The purchase price is the starting point and it matters. But it does not tell the whole story of what buying a particular home will cost or feel like financially. Two homes at the same purchase price can produce very different monthly payments and very different cash requirements at closing depending on the tax rate, the insurance cost, the HOA structure, and the loan program being used.

Number Two: Monthly Payment

The monthly housing payment is what the buyer lives with every single month for the life of the loan. It can include principal and interest, property taxes, homeowner's insurance, mortgage insurance if applicable, and HOA dues if the property is in an association. Each of those components can vary significantly from one property to the next even when the purchase prices are identical.

A buyer who is comfortable with a purchase price may look at the monthly payment and find it does not fit their actual budget once all of the components are factored in. A buyer who is focused only on the price is missing the number that matters most to their month-to-month financial life.

Number Three: Cash to Close

Cash to close is the amount the buyer needs to bring to the transaction. It includes the down payment, closing costs, and prepaid expenses like homeowner's insurance and prepaid interest. It is reduced by any lender credits, eligible down payment assistance, and seller concessions that apply to the transaction.

Two buyers with identical purchase prices and monthly payments may face very different cash-to-close requirements depending on their loan program, their negotiating strategy, and what assistance is available to them. A buyer who is comfortable with both the price and the payment but who cannot comfortably cover what is required at closing has a solvable problem that requires a specific strategy rather than a different house.

Why These Three Numbers Must Be Understood Together

As Shelby Pennix explains these numbers are connected but they are not interchangeable. Adjusting one of them affects the others in ways that are not always intuitive. A lower purchase price changes the payment and the cash requirement. A seller concession changes the cash to close without changing the payment. A rate buydown changes the payment without changing the price. Understanding how all three interact is what allows a buyer to build a home buying strategy that actually works for their specific situation rather than optimizing for only one number.

Message Shelby Pennix the word THREE and she will build your home buying budget around all three numbers so you know exactly where you stand before you start shopping. Call or text 404-451-1250 or send a DM directly.

Sources

ConsumerFinancialProtectionBureau.gov
FannieMae.com
MortgageNewsDaily.com
Investopedia.com
BankRate.com