NMLS# 3151

Wednesday, October 23, 2013

Preparing your finances: How much house can you afford?

You just got pre-approved to a buy a house and are ready to get the ball rolling.  But have you thought this all the way through, or do you really think that your $5000 down payment is all you need?

Buying a home should lead you to financial freedom, not a financial mess.  So it's important to take every dollar into consideration before signing those papers.  By doing this, you are much more likely to buy something you can afford instead of making an impulse decision.  Deciding on the perfect home price isn't easy but it will save you financial stress in the long run.

So how much house can you actually afford? Read below to find out more.

Click here to get pre-approved for a home loan today.  

Only You Know Your Personal Situation

  • Don't rely on your lender or real estate agent to set your perfect purchase price.  Yes, they can advise you on the mortgage guidelines and what they consider to be a safe lending amount.  However, every financial situation is unique and they can't foresee every possible issue.  It's best to start by getting pre-approved by a mortgage loan officer to get an estimate of the loan amount you will be to obtain.  From there, you need to make a decision about what you feel comfortable paying.  
  • Don't let emotion become the basis of your logic.  It's common  for buyers to purchase on impulse after viewing a house that they love but there are still other circumstances to take into consideration.  Running through the actual calculations won't leave yourself second guessing. 
  • Don't buy just because you can afford it.  Emergency's come up and maybe you want to plan a vacation but at the end of the month if you aren't left with any money after paying your mortgage was it really worth it?  When it comes to your credit, only making the minimum payment isn't always the best idea.  Especially when it comes to a large loan like a mortgage, paying higher than the minimum payment is extremely beneficial as the extra payment goes directly towards your principal balance, not straight to interest.  This could end up saving you thousands of dollars over the life of the loan.  

Make The Best Decision For You

  • Do think about how much you can easily afford.  Besides the numbers you've been given, make some calculations of your own and see what you feel comfortable with.  Think of your monthly income as a whole and try to keep your payment under 30% to 35% of your gross income.  It's important to know that you have wiggle room in case an emergency comes up unexpectedly.  
  • Do think about your future financial stability.  It's not just what you can afford right now, it's about what you can afford ten years down the road.  The golden rule is to always have at least 3 to 6 months in reserve funds.  Do you have big expenses coming up like college tuition or a wedding?  Make sure that your financial commitments down the road aren't going to be affected by making the decision to purchase a bigger house.  
If you've purchased a home before, how did you best determine how much home you could afford? Please leave your comments or tips below to share with others.  

No comments:

Post a Comment