We all have heard the phrase, "house poor". Just because a lender says you qualify for $xxx,xxx mortgage, doesn't necessarily mean you should do that. That number is based on a formula that doesn’t consider your current and future financial and personal goals.
Here are some Tips to Determine How Much Mortgage you can Realistically Afford:
1. Prepare a family budget that tallies your ongoing monthly bills for everything -- credit cards, car and student loans, lunch at work, day care, date night, vacations, and savings.
2. Consider how much money you have for a down payment. This is necessary to determine the type of loan and the payment.
3. Compute your overall debt - EVERYTHING should not be higher than 43% of your gross annual income.(multiply your income by .43, then divide by 12 - this is your monthly maximum you should not exceed in a house payment PLUS all other bills)
4. Use your current rent or house payment as a guide. If renting, tax benefits of home ownership allow you to afford a house payment about 1/3 higher than what you pay in rent.
Once this is done - it's time to look for the perfect home! Shop here:
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