If you’re thinking of buying a home, it is important to contemplate on the type of house you can afford. Many first-time homebuyers today often make the mistake of getting a home loan or a property that is beyond what they are earning. It is best to educate yourself about the lender guidelines to know what size of mortgage you can qualify for.
A Payment You Can Afford
It is important to note that just because a lender tells you that you qualify for a loan does not necessarily mean that you comfortably afford the monthly payments. You should choose a loan amount and a monthly payment that works for your situation. Primary Residential Mortgage, Inc. notes that this means considering your income, ongoing debt, and overall financial standing.
Other Related Expenses
Your monthly mortgage payment is not the only financial component of owning a house. You also need to consider the total monthly housing expenses, which include property taxes, homeowners insurance, HOA fees, as well as the private mortgage insurance (if you pay less than 20% down payment). You, furthermore, need to factor the cost of maintaining the property.
Possible Changes in Payment
Note that the type of mortgage you choose can affect how your monthly payment will change. If you choose a fixed-rate mortgage, your monthly fee is constant and will not change over the life of the loan. If you, however, select an adjustable-rate mortgage (ARM), your monthly payment may increase or decrease over time. When choosing the latter, be sure to be aware of downsides and how much your loan payment will increase.
Effects on Your Saving
Paying a down payment and other associated costs can eat up your savings. This is why it is important that you have enough cash reserve to be prepared for the unexpected financial challenges. It is best to have savings that can cover about four to six months of overall housing expenses, which include your monthly payment, homeowners insurance, property tax, and other related expenses.
Buying a home is a big financial commitment, so be sure to avoid making the costliest mistake. Choose the home that fits your needs, and not a house that is way over what you can comfortably afford. Talk to a reliable lender and learn more about the types of mortgage the suit your situation.