Buying a home is one. A mortgage is a long-term commitment, thus a mistake has the potential to haunt you a very long time. With numerous exotic mortgage products available, and sales quotas to meet, some loan officers will push for you as much mortgage as you are ready to take. With the emotion and adrenaline-charged thrill of buying your dream home, you might be tempted to take on. Don’t. Adhere to an affordable mortgage and you’ll be more happy long-term.
Ascertain you monthly, after-tax (net) income. Determine your total monthly debt expenditures, excluding mortgage or rent obligations. Divide your total debt. Reduce your debt before getting a mortgage in the event the debt is greater than 25% of your income. Assume monthly net income is $4,500 and monthly debt is $800. $800/$4,500 = 18 percent
Complete your monthly living expenses for the year. Include transportation, food, clothes, entertainment, credit card purchases, travel, pet care, out-of-pocket medical expenses and some other miscellaneous monthly expenditures. Divide the total by 12 for an average monthly living expense total. Assume typical monthly living expenses are $1,200.
Insert your average monthly living expense total and your total monthly debt to seek out your total monthly cost. Subtract total cost from monthly income. Multiply the difference by.7 to discover your maximum monthly payment. Monthly debt + Monthly living expenses = Total monthly expenditures $800 + $1,200 = $2,000 Monthly net income — Complete monthly expenditures = Maximum affordable monthly payment for all homeownership costs (mortgage, taxes, insurance). $4,500 — $2,000 = $2,500 Maximum affordable monthly payment for all homeownership costs x.7 = max affordable monthly mortgage payment $2,500 x.7 = $1,750 Your highest monthly affordable mortgage payment is $1,750.
Consult a mortgage lender to learn mortgage applications and your credit score. A higher credit score gets you a lower interest rate and allows you to be eligible for a bigger loan. Enter your highest affordable payment to among numerous online mortgage calculators and plug in different interest rates and terms to acquire ballpark mortgage amounts supported by a $1,750 payment. The monthly payment for a 30-year fixed mortgage of $300,000 at 6 percent is $1,799. The payment for the same mortgage at 6.5 percent is 1,896.