How much home can you afford?

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How much home can you afford?

Posted On : Jul-11-2011 | seen (438) times | Article Word Count : 613 |

Just how much home can you afford? There are many variables to contemplate. The first thing to take into account is just how much you pay monthly for different expenses.

Just how much home can you afford? There are many variables to contemplate. The first thing to take into account is just how much you pay monthly for different expenses. Do not forget to consider the following expenses:
Monthly child support payments
Monthly auto payments
Monthly credit card payments
Monthly association fees
Other monthly fees
Utilities (phone, power, gas, cable/satellite, and water)
You will also need to think about your expenditures that are not monthly, such as your auto insurance and property taxes on your vehicle. For example, take your auto insurance bill (paid every 6 months) and divide it by 6. Add this to your monthly bills.

Now it is time to find out your monthly income. While most banks and mortgage brokers will use your gross income (before taxes) in their calculations, you should use your take home pay instead. This is a more realistic number. If your salary fluctuates, then use the lowest monthly income that you have got in the last year. This will mean that you will most likely be eligible for a less expensive house. It will be a house that you can easily afford and you will run less risk of losing your house.

Keep in mind that you will have monthly expenditures as a house owner that you do not have as a renter. Most mortgages will include your homeowner’s insurance and home property taxes in your monthly payment. However, the mortgage calculators do not include those figures when telling you what you can afford. If there is a homeowner’s association, then you must include the monthly homeowner’s association (HOA) fees in your calculations. In some cases, this will mean that you cannot afford the home.

Most lenders want to see a total debt-to-income ratio of 36% or less. They also would like to see a housing payment-to-income ratio of 28% to 33%. For your peace of mind, try to keep your monthly payment to 25% or less of your take home pay. You should also take into account your savings needs. Are you saving for your children’s college education or for your retirement? Keep in mind these expenses as well.

Mortgage lenders are tightening the necessities for mortgages. The better your personal financial circumstance is the better. Before thinking about purchasing a property, you should work on paying off as much of your personal debt as possible. Have your credit report run so that you are conscious of any complications with your credit. If there are any, you need to work on fixing them first. Higher credit scores equal lower interest rates. Work on saving as much money as possible for your down payment. If you have a down payment of 20% or more of the purchase price, then you will save $50 to $80 a month by not having to purchase private mortgage insurance (PMI).

Finally, yet importantly, do not forget your closing costs. You could wind up paying points in order to get a better interest rate. Each point is 1% of the loan amount. Your lender will demand an appraisal of the property to make sure that the house is worth what you are paying. You are responsible for paying this fee at closing. You will also be accountable for paying title insurance. This safeguards your right to the house. You will need to have the property checked for finalizing the agreement. There is also the first year’s fee for homeowner’s insurance, transfer taxes, attorney fees, title search fee, and an advance on the property taxes (to be placed in your escrow account). Some or all of these charges will be due at the closing.

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<h1>How much home can you afford?</h1> Author: <a href='http://www.articleseen.com/profile_Darrell Rigley.aspx'>Darrell Rigley</a> Just how much home can you afford? There are many variables to contemplate. The first thing to take into account is just how much you pay monthly for different expenses. Do not forget to consider the following expenses:
Monthly child support payments
Monthly auto payments
Monthly credit card payments
Monthly association fees
Other monthly fees
Utilities (phone, power, gas, cable/satellite, and water)
You will also need to think about your expenditures that are not monthly, such as your auto insurance and property taxes on your vehicle. For example, take your auto insurance bill (paid every 6 months) and divide it by 6. Add this to your monthly bills.

Now it is time to find out your monthly income. While most banks and mortgage brokers will use your gross income (before taxes) in their calculations, you should use your take home pay instead. This is a more realistic number. If your salary fluctuates, then use the lowest monthly income that you have got in the last year. This will mean that you will most likely be eligible for a less expensive house. It will be a house that you can easily afford and you will run less risk of losing your house.

Keep in mind that you will have monthly expenditures as a house owner that you do not have as a renter. Most mortgages will include your homeowner’s insurance and home property taxes in your monthly payment. However, the mortgage calculators do not include those figures when telling you what you can afford. If there is a homeowner’s association, then you must include the monthly homeowner’s association (HOA) fees in your calculations. In some cases, this will mean that you cannot afford the home.

Most lenders want to see a total debt-to-income ratio of 36% or less. They also would like to see a housing payment-to-income ratio of 28% to 33%. For your peace of mind, try to keep your monthly payment to 25% or less of your take home pay. You should also take into account your savings needs. Are you saving for your children’s college education or for your retirement? Keep in mind these expenses as well.

Mortgage lenders are tightening the necessities for mortgages. The better your personal financial circumstance is the better. Before thinking about purchasing a property, you should work on paying off as much of your personal debt as possible. Have your credit report run so that you are conscious of any complications with your credit. If there are any, you need to work on fixing them first. Higher credit scores equal lower interest rates. Work on saving as much money as possible for your down payment. If you have a down payment of 20% or more of the purchase price, then you will save $50 to $80 a month by not having to purchase private mortgage insurance (PMI).

Finally, yet importantly, do not forget your closing costs. You could wind up paying points in order to get a better interest rate. Each point is 1% of the loan amount. Your lender will demand an appraisal of the property to make sure that the house is worth what you are paying. You are responsible for paying this fee at closing. You will also be accountable for paying title insurance. This safeguards your right to the house. You will need to have the property checked for finalizing the agreement. There is also the first year’s fee for homeowner’s insurance, transfer taxes, attorney fees, title search fee, and an advance on the property taxes (to be placed in your escrow account). Some or all of these charges will be due at the closing.About the Author: Darrell Rigley is the owner of <a rel="nofollow" href="http://www.loanreductionhero.com/">Loan Reduction Hero</a>. His company performs <a rel="nofollow" href="http://www.loanreductionhero.com/forensic-loan-audit.html">forensic loan audits</a>, on potentially fraudulent mortgages, in an attempt to help families <a rel="nofollow" href="http://www.loanreductionhero.com/how-to-avoid-foreclosure.html">avoid foreclosing on their homes</a>. Article Source: <a href='http://www.articleseen.com/Article_How-much-home-can-you-afford_65981.aspx'> http://www.articleseen.com/Article_How much home can you afford?_65981.aspx</a>

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Author Resource :
Darrell Rigley is the owner of Loan Reduction Hero. His company performs forensic loan audits, on potentially fraudulent mortgages, in an attempt to help families avoid foreclosing on their homes.

Keywords : Loan Reduction Hero, forensic loan audits, avoid foreclosing on their homes, fraudulent mortgages,

Category : Finance : Finance

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