of the hardest calls to make when it comes to buying a home is how
much you want to spend. The larger the mortgage you take out, the
bigger the payments will be. Of course, there is more to the cost
than simply the amount of the mortgage, as interest plays a big role
as well. How much can you afford to finance? Consider these important
How Is Your Credit?
If you have great credit you are
likely to qualify for the lowest interest rates. This means that you
will be able to take out a larger loan, since the same monthly
payment will get you more. More of the money you spend each month
goes to principal, meaning you will also pay it off more quickly.
People with credit problems will
find that a larger amount of their monthly payment has to go to
interest since they will get higher rates. This means that the amount
you can afford to finance is actually lower.
Look At Other Expenses
Take a look at all of your
monthly payments and debts that need to be paid off. Try to be
realistic about what you can really afford to pay. While a mortgage
company may qualify you for a larger loan, that doesn’t mean you
can afford it in reality. Take into consideration your lifestyle and
the extra things on which you like to spend money. Are you willing to
give them up to pay a bigger mortgage?
The items you pay for monthly
may be static in some ways and may fluctuate in other ways. You need
to have a realistic idea of what you spend each month on average to
be able to determine what you can afford to finance for your
Don’t Forget Closing, Taxes,
When calculating a monthly
payment, don’t forget to add in your homeowner’s insurance and
your property taxes. Once these are added in, you might want to
consider financing a smaller amount in order to get the monthly
payment down to a manageable amount. Once these two are added in, it
can push your payment above your comfort level.
You will also be paying closing
costs that are in some part based on the amount financed. The more
you finance, the larger these fees are likely to be. It’s important
to remember this when you consider how much you can actually afford
to finance on your new home.
Have a question about a home or want to talk about selling yours? Or, if you have any other questions or comments, then feel free to e-mail or call using any of the information below. You will get a response as quickly as possible.