How To Purchase A House You Can Afford

 

Of all the phases involved in purchasing a home, one of the most important is determining how much of a mortgage you can reasonably afford. By failing to take into account your future income or any emergencies that may arise, you could find yourself unable to make your monthly payments. Consequently, you could damage your credit or, worse yet, find yourself threatened with foreclosure. Here are a few ways to avoid assuming a home loan that might be too large for you to handle.

Step#1  

Use an online mortgage calculator to compare your monthly payments based on the price of various properties, down payments, interest rates and loan terms.

In addition to principal and interest, your monthly mortgage payments will also include property taxes and homeowners insurance. In general, this total should not exceed more than 28% of your gross monthly income (before taxes). 

Step#2 

Determine what your monthly debt obligation will be by adding your mortgage payment to any car loans, child support and alimony, credit card bills or student loans you might have. This total should represent no more than 36% of your gross income.

Step#3

When you have finally decided on a loan amount that fits your budget, consider lowering it a little more as a safety precaution, to allow for any unexpected expenses. As a homeowner, you should also plan on setting aside a sizable amount to cover major home repairs — around $3,000.00, minimum.

Do not forget that a home purchase is a long-term commitment. Take ample time to study the mortgage payment options, and don’t rush into anything. Make sure you fully satisfied that you will be able to meet the monthly obligations in the future. You do not want to risk losing your new home for any reason.