Deciding just how much mortgage you can reasonably manage is one of the very important, and most overlooked, steps in purchasing a home. Since real estate agents, mortgage loan officers and mortgage businesses are compensated based on a percentage of the home’s cost, which directly impacts the mortgage sum, they have little interest in telling one to be conservative.
Income Types
Determine just what half of your monthly income means. Mortgage lenders use your gross monthly income, the amount before any other deductions, to make their calculations. In case you have a two-year history of getting bonuses or commissions, lenders will consider that as income when approving your loan. If you’re thinking of half of your net income, your income after taxes and other deductionsyour payments are more likely to be manageable.
Care and Repairs
Due a home means that you will have to cover repairs and upkeep. Your mortgage note will have a clause requiring you to keep your home in good shape. When the hot water heater breaks or the roof begins to leak, you will have to cover those repairs. If you spend half your income on your mortgage payment, then you may have trouble saving money for all these expenses.
Other Debts
Spending half your monthly income on your home might make it hard to obtain financing for any additional debt like that owed on cars or bank cards. Lending standards have worked their way to all sorts of loans, not just mortgages. Consider your current debt when deciding just how much more to take on.
Lifestyle
Decide if you’re willing to sacrifice other items and activities to have a home that needs such a high mortgage payment. Expensive hobbies may have to be cut back or removed. Vacations, dining out and luxury items may all have to be cut back on or removed to accommodate your big mortgage payment.
Test-Drive the Payment
The best way to understand if the new loan payment is a fantastic idea is to test it before you buy it. Determine how much more the payment would be than your current house or rent payment, and set the gap to a savings account every month for a few months if you make your current rent or mortgage payment. If you find you have to use the money saved to live your life how you need, the house payment is not reasonably priced. If you’re delighted with your frugal lifestyle, find a lender that will approve you for the payment.