Do I Make Enough Money To Buy A House In Mission Viejo?
Can you afford a house in Mission Viejo? Well the truth is you can’t find that out simply by reading a blog post. But we can talk a bit about the financial side of buying a home so it’s less of a mystery.
Lenders start the qualifying process by assessing your income and debt ratios. Most loans will allow you to use 31% of your monthly gross income as your housing payment. This includes your mortgage, interest, taxes and insurance. It might also include homeowner’s association dues if applicable. Lender programs can vary a little, but this is a general guideline.
The next aspect they consider is your total debt. This includes all recurring debt, such as an auto loan, student loans, credit cards, installment loans, and anything else that you pay each month. These monthly payments normally cannot exceed 43% of your monthly gross income.
It’s important to note that neither of these ratios includes utilities, auto expenses, food or entertainment. You will need to consider your lifestyle and other commitments when determining a payment that you are comfortable with, not just one for which you can qualify.
Affording a home loan also includes a down payment. There are many kinds of loan available. A FHA (Federal Housing Authority) loan requires a mere 3.5% down payment and that can be a gift. There are a variety of loan options and assistance programs for low and moderate income borrowers and other specific situations which might help as well. A VA (Veteran’s Administration) loan for instance has no down payment.
In addition to the down payment, you will also need to have money to pay for closing costs, inspections and the appraisal. Typically these costs are about 3% of the home purchase price. That’s a ballpark, but your lender will provide you with specifics. Some of these costs can also be negotiated to have the seller pay for them. This is really just a way to finance the costs, as the seller is only concerned with their net profit. Yet it can greatly reduce your out of pocket costs to buy the home.
There are financial advantages to buying a Mission Viejo home as well. Part of the consideration of buying a home has to include a visit to your tax professional. Learn how the mortgage interest and other costs can be tax deductible and the benefit of this tax break on your overall financial situation.
Your lender will help you navigate through any options that are open to you based on your financial situation. They will talk about the mortgage payment, the down payment, closing costs and other requirements. Then you will have a clear idea about affordability and your readiness to purchase a house in Mission Viejo.
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