Can You Afford A Home Mortgage?

You’ve finally found your dream house and are ready to commit but there’s that question of home mortgage affordability. Don’t let this thought scare you away just yet. Find out if you can go ahead and buy that house at last.

1. Know how much you have and how much you owe. How much income are you receiving at present? Is there a chance that it would increase? What will be your financial situation several years from now?How much money do you owe to creditors? How much monthly payments do you make? Can you still afford to shell out more money after the bills are paid?You’ll need a consistent source of income that can cover your mortgage and other expenses. Try to foresee possibilities that you’ll need to factor in: a new child, changes in the job, back-to-school plans and cash-flow five or several years from now. Be prepared to be in it for the long haul.

2. If your debts are well managed, then you can afford a home mortgage. The lender will approve your loan more quickly if he sees that your debt-to-income ratio is well within manageable range.The lender will ensure that your payments will only total 33% or less of your monthly gross income. Otherwise, pay off some of your debts before applying for a home mortgage.

3. Decide which one you prefer: fixed, adjustable or balloon rates. Paying a fixed rate is a more popular choice because it can protect you from surges in interests while paying the lowest rate possible for an agreed period of time may be lighter on your budget, but your mortgage payment can go up later.

4. Interest rates will go up and down depending on the activity of the market. If you can read and understand market trends and economic indicators, you can save a lot of money.

5. Be prepared to pay a downpayment. Typically, it is about 20% of the total price. A house priced at $200,000 will require a down of $40,000. There are also loans with low or no-downpayments, but it will cost you in terms of equity in the long run.

6. You have enough money saved that’s equivalent to at least three months’ monthly income. This will help cover unexpected expenses that could affect your mortgage payments.There is no fixed answer on the affordability of a home mortgage. It will all depend upon your income, debt, interest rate and other factors. If the home mortgage fits into your personal situation, then you can definitely afford it.

Creation Of A Home Budget

Should you have a home budget? We all need help once-in-a-while. We’re not only referring to personal matters. We’re talking about financial matters. We reach a point where we have to buy something out of necessity, but we can’t pay in full just yet. An example of this is a home. Now the time has come for you to repay on what you own.

You must have the discipline to plan out how much you should have saved so when your time is up and you have to shell out the money you owed there and then (plus interest), you wouldn’t have a hard time doing so. Prioritize which of the debts must be paid first.

Prioritize your bills. Setup a home budget list so it will be more organized because then you could see everything at a glance. This is what you call establishing goals. Establish first what must be prioritized over those you could schedule paying some other time. The essential debts are debts that should be on top of your list. These are:- Rent or mortgage. Of course, who in his right mind won’t pay up as soon as possible.

Paying your rent or mortgage bills on time helps you have a roof over your head. - Child support. If you don’t pay on time, there’s a possibility you can be held behind bars. - Utility bills. As much as possible, set aside a budget on gas, heating, water, electricity or telephone when you get your paycheck. In doing so, when the bill comes, then you have something prepared. - Car payments. This also includes car maintenance. - Other secured loans. If you don’t repay collaterals, the creditor takes the property even without court interference. The non-essential debts can be set aside because when these aren’t paid, they don’t have that much of a side effect. It’s a desired goal but not really a priority. The only concern that can be considered when you don’t pay non-essentials debts for a long period of time is the negative image it could project on your credit report. - Department store and gasoline charges. Failure to pay these charges may result in losing credit card privileges. If it’s too large, you might be sued.-

Loans from friends and relatives. Morally speaking, there is an obligation to pay but sometimes since they’re family, we think that they will understand if we can’t. Check with them if you can delay the payment and ask them for how long.- Newspaper and magazine subscriptions. Little by little, if you haven’t paid, they’ll amount to so much. - Legal and accounting bills.

If these remain unpaid after a long period of time, then that’s when you might be sued. - Other unsecured loans. In unsecured loans, there’s no collateral for the debt. This means that the creditor can sue and then collect the debt. Here’s the confusing part. Some of the bills border between essential and non-essential. If you let these bills defer for a long period of time, it could have consequences in your personal life. - Auto insurance. The consequence in some states is losing your driver’s license. - Medical insurance of bills.

If you have a tainted record, you might have a hard time getting new insurance in the future. - Credit and charge cards. If you don’t pay your bills on time, you might lose your credit privileges and would have a hard time applying for a new credit card. Now that we laid out the groundwork on how you can prioritize which bill to pay first, we move on to having a time frame. It’s best that you have a calendar in front of you. A palm pilot or the calendar in your Microsoft Office program will do. Mark the dates wherein you would have to pay the specific debt – be it essential or non-essential. Then what you can do is set aside the bill that is allotted for that debt. As for the budget, prevention is always better than cure.

You know how much you get in a month. That being in mind, you must allot how much percentage of your salary shall go to which. Then do your best to stick to that budget. If this is how much you should spend for leisure, then that’s how much you should spend for leisure. If at one point, it went overboard, then there would have to be a sacrifice on another aspect, such as food. That seems off, right?So even in budget, you must also list down which is number one for you. Have the discipline to stick to your priority, your home budget and your time frame. If you succeeded, paying the bills won’t be any problem.