How Much Mortgage Can I Afford
The amount of mortgage that you can afford will depend on the amount of money you have available to pay your mortgage. Your income may be quite substantial however you must be careful to consider what your general expenses are like and also to be sure to leave additional money in your budget for unexpected occurrences. Before a mortgage is approved there are three main areas that will be looked on by your mortgage company. These will include your credit history, your monthly income and the amount of money you will be able to pay down on your new home. In general you should at least budget your mortgage at one third of your monthly income, this is the amount that experts have estimated to be the usual amount paid for a mortgage. Many people believe that they must buy a home by a certain age and consequently end up acquiring more debt than they can manage. A home is a wonderful investment, but it must be obtained when the funds are truly available.
It is important that you do not burden yourself with an amount that you cannot afford. Before purchasing your house try to reduce your debt burden substantially. For example it is best to have the mortgage be the greatest expense at any one time, it is not advisable to take out many loans that may also have fluctuating interests rates that will affect your ability to pay your mortgage. If you can avoid paying for your mortgage along with other loans for example your car and student loans at any given point this will greatly decrease the risk of you having any issues with paying your mortgage on time. It is therefore preferable that you delay buying a home until you have cleared most of your other debts.
It is best to create a proper list of expenses by perhaps using sophisticated software to give you a more accurate and comprehensive view of what your monthly expenses look like. Ensure it is thorough, do not forget even the most trivial of expenses. Once this is done you now have a clear indication of what funds are truly available for your mortgage. Even though it is estimated that your mortgage will likely be one third of your salary it may be a little less or more depending on the results of this accurately formulated budget.
When creating the budget you will also be required to make careful provisions for the recurring expense for insurance and real estate taxes. Once these have also be budgeted you will now be able to assess the exact amount of mortgage that you can truly afford.
Hence if you earn $30,000 per year after taxes, You will have $2500 that can be dedicated to your monthly expenses. If you have a monthly expense amount of $1500 per month you will typically be able to pay $1000 per month on your mortgage. However a safer amount to devote to your monthly mortgage will probably be no more than $750. Even though in your previous calculations you may have alloted an amount for miscellaneous expense you should still attempt to give yourself enough additional cash in hand to offset any unpredictable events. If you use the general guideline of using a third of your monthly pay then the amount will approximately be $833.
It is also imperative that you speak to your banking advisers to get a better idea of what other requirements you will need to fulfil to get your mortgage.