How Much Mortgage Can You Really Afford? What You Need to Know
When you decide to start looking to buy a house, the list of questions is long indeed.
But the first question is the most crucial: How much house can I afford?
All the other questions proceed from that one.
The easiest way to answer that question is to start running numbers through a mortgage payment calculator. It will allow you to plug in various scenarios – prices, interest rates, down payments, etc – and show you what your monthly payments would be in each instance.
A couple tips to get started: You’ll need to know where current interest rates are now, and how much you can realistically afford as a down payment. A 20% down payment is ideal, but depending on the type of mortgage, you can put down as little as 5% (and in some special cases, none at all).
Another important point to remember is, you don’t want to end up ‘house poor’. That’s when you buy a house but you’re paying such a large mortgage you can’t afford to do anything else, like renovate, buy new furniture, upgrade appliances, entertain, etc. Make sure you can afford to enjoy your house and maintain it properly.
The mortgage payment calculator can give you a good working idea of what you can afford, but when you start to get closer to house shopping, it pays to talk to a home loan specialist who can work with your specific needs and goals.
A specialist can also help you pre-qualify for a mortgage, so when you find the right house, you can jump on it quickly.
Pre-qualifying is a very good idea because it speeds up the process when you find the home that you want to buy. When you negotiate the price with the seller, it helps them know that you are serious and it gives you some leverage since the seller knows that there is little chance your offer won’t make it to a contract because of financing problems.
It also makes buying a home less stressful since a lot of the paperwork is done before the clock starts ticking on the contract, so you can focus on home inspection and other important issues.
If you found this information helpful, you may also want to check out these articles:
- Tips for First Time Home Buyers
- Improving Your Credit for a Mortgage
- How to Choose the Right Mortgage Lender
Lost? Contact us for a reliable guide through the home buying process.