House-hunting is exciting. However, don’t allow your enthusiasm to make you lose sight of the realities of your financial situation. It’s not enough to qualify for a mortgage. You must also ensure you can make the payments over the next 15, 25 or 30 years. Here are a few things to consider to avoid running into trouble.
THE ONE-THIRD RULE
Many financial professionals advise against spending more than one-third of your net income on your mortgage payments. You may be able to afford a larger payment, and your lender may agree to modify your agreement. Still, you should give yourself a buffer to ensure you have money on hand for an emergency.
You must consider all your debt when determining much you can afford to pay towards your mortgage every month. This is a significant factor for financial institutions and helps them determine how much they’ll let you borrow. For example, if your mortgage, car and credit card payments take up half your net monthly income, the bank may consider you a high risk and lend you less money.
Always keep in mind that the cost of buying a house doesn’t stop at the mortgage. You must also factor in expenses like maintenance, repairs and municipal taxes when making your calculations.
Connect with me today if you want more information about the mortgage process.