Make Sure You Know How Much Home You Can Afford
by Mitch P. Truax
Before you even consider about shopping for a home, you should determine how much you can afford to pay for it. This will save you untold hours looking at houses that you should not really be in the market for to begin with.
There are a number of factors that determine how much you can spend on a house, including household income, the amount of the deposit, and the interest rates and closing costs on home loans in your area. What your expenses are and will be is another important factor in this determination since the lender will want to make sure you can cover the mortgage after these other expenses.
What you can afford to pay will be determined by ratios that are based on factors such as income and expense, outstanding debt, amount of deposit and closing costs.
You can do these calculations yourself, or you can ask for the assistance of a mortgage broker to do them for you.
One of the biggest stumbling blocks to owning a home is the deposit. People don’t routinely save as much as they did in the past, so often they will not have any sizable balances in savings accounts edmonton mortgage brokers. No down payment loans are rarely granted these days, since they were such a big reason for the mortgage problems over the last couple of years.
Usually, you won’t be in a position to close on a mortgage without at least a 10% deposit. This means that for an average priced house of $200,000, you will have to have the minimum amount of $20,000 for the deposit, and the additional funds for closing costs. A bank can easily give you an estimate of closing costs.
Five thousand dollars is probably a fair estimate of how much you will need for closing costs, so be prepared to have $25,000 saved up. Will you also afford the mortgage payments? You can visit many sites on the internet that will help you estimate what you can afford for a monthly mortgage, or you can consult with a mortgage professional.
The traditional rule is that your home costs should not be greater than 25% of your income. Excessive credit card debt will have an effect on your disposable income, remember. The lender expects you to use the balance after the 25% for such items as clothing, utilities, education and savings, not high minimum payments on a card calgary mortgage brokers. A high credit card debt means that you will have that much less available for your basic needs.
If you net $6,000 a month, you can manage a mortgage payment of about $1,500 (25%), barring any other large, standing expenses. This is at least a starting point for your shopping trip for a new house.
Blogging