When looking for a home, one of the first things you should do is decide how much you can spend on your mortgage. No sense falling in love with something you can’t afford. A lender will be able to tell you what you can afford at this time. A lender does not take into account future finances and personal goals. The best way you can decide what you can afford is as follow:
- Detailed Budget – Rule of thumb is that you can afford a home 2-3 times your gross income BUT it does not take into account your monthly expenses. Prepare a daily budget that takes into account your monthly bills.
- If you are using a loan that needs a down payment – How much money do you plan to spend on your down payment. The more you put down the smaller your monthly mortgage will be.
- Overall debt – When figuring out a loan amount the lender usually follows the 43% rule. This takes into account your monthly principle, interest, taxes, plus the bills you used your detailed budget for, utilities and credit cards.
- If you rent and want to buy – use your rental payment as a guideline. If you are struggling paying your rent, it will be no difference with a home loan at that amount or greater. Your best bet is to stay around the price you pay or go down if possible.
For additional information on the home buying process call/text me at: 931-237-1417. I will not have you go into this alone.
original article from HouseLogic