How Much Home Can You Afford?
Everyone would love to walk into a bank and get a mortgage for their dream home. Buying a home can be very exciting and prove to be lots of fun. Imagine the gratification of putting to use the money you have saved year after year, then finally having a place to call your own.
With a market full of inventory and so many possibilities at your fingertips it is easy for you to forget one of the most important questions you will ask yourself: How much can I afford? Is the most important thing to you the counter tops of the kitchen or how big your master bedroom is? What is important is paying the mortgage, home insurance and finding the cash for maintenance of the property. In the real world these things are paramount or that beautiful home will become a nightmare and burden.
Start by calculating the cost. By simply sitting down and calculating some simple figures you will have an idea of where you stand. The first step is to add up all your income and your partner’s income if that applies to you. Calculate your affordability range by seeing what is left after you take away your debts. It is very important to have a general level of comfort with your mortgage so the larger the deposit the lower your monthly payments. Generally, you should not exceed 30 to 40 percent of your income for your payments.
As a good rule of thumb, it is imperative to set aside money each month for rainy days. Your income may be very stable now and you do not anticipate any change, but you need to foresee any sudden expenditure coming your way. Save in your monthly payment at least 3 to 6 months of your mortgage payments per year. So, whatever your mortgage payment is monthly add a buffer amount that will equal those payments. Also, pay as much as you can over your monthly amount, a little extra can reduce the length of time for your mortgage. I know all this seems like a hard job even impossible, but the truth is that if you cannot factor that extra money into your monthly payments then you are not ready for a mortgage and should continue saving.
You want to make sure after months of looking, sleepless nights of deliberating and the grueling, long financing process that you can keep your house and enjoy the fruit of your work.
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