Before starting to look for a house to buy, determine how much you will be spending your money and how much you can borrow from your loan. You need to have an idea how much you can afford. This can save your time from buying and this can save you from trouble by making sure you are looking in the right price range.
Weigh the factors how much you can really afford
Your income: Lenders and professional loan advisers usually tell us that our housing expenses should not exceed from 25 to 28 percent from our gross monthly income. Housing expenses includes the monthly mortgage principals, interest payments, property taxes, and homeowner’s insurance. Consider also your payments in social security, child support, interest and dividend income, rental income after deducting expenses and so on.
Your Debts: Lenders also consider your debts and monthly obligations such as other real estate loans and installment loans. It is expected that your house expenses plus your debts should not be 33 to 36 percent of your gross monthly income. Pay off as much debt before applying for a mortgage. If you determine which monthly mortgage payments to afford will help you to decide what maximum loan you can borrow. You can also use mortgage calculator to know what amount you can borrow for your desired loan terms.
Your Down Payment: Lenders expect you to have enough money to pay the down payment. It is usually the 20 percent of the asking price of the house and to pay the closing cost. To consider the sources of your down payments, check your savings, stocks, mutual funds, employee savings fund, etc. For some mortgage payment programs, they allow their buyers to pay using gift of money from parents or grants from nonprofit housing assistance for part of their down payment.
Whenever you borrow, make sure you are comfortable. To get a bigger loan, do not overstate your income. If you lie about your income, you could end up with a loan you cannot afford and worse, you could lose your house. Worst, you can face fraud and get a criminal record.
