It doesn’t matter if you’re a first-time home buyer, or a seasoned pro looking for a bigger and better dream home, you’re probably asking yourself the same questions. Can I afford this? Is this the right time?
If you’re unsure, you can use a mortgage calculator from emortgagecalculator, ask the experts and lenders, real estate agents or even your family. But the reality is, only you can truly know whether you can really afford to buy a home right now.
It’s true, buyers can have their pick of any house they want, because the market is saturated with homes at discount prices. But just because you’re getting the deal of lifetime, doesn’t make it a smart choice if you can’t afford it.
Here’s 4 basic questions to ask yourself when determining if you can afford a mortgage.
Are you spending less than you earn?
You can answer this question by looking at (or creating) your budget. You should at least know the basics, like how much you spend every week/month, and how much income you bring in. Add up your total expenses, minus your take-home pay and calculate the difference.
You can answer this question by looking at (or creating) your budget. You should at least know the basics, like how much you spend every week/month, and how much income you bring in. Add up your total expenses, minus your take-home pay and calculate the difference.
Is the mortgage payment about 25% of your income?
A good way to determine if you can really afford a mortgage is to calculate the monthly payment by how much income you earn. A good rule of thumb is to not spend more than 25% of your take home pay on housing/rent payments. This gives you more flexibility in the event of an emergency or if other problems arise.
A good way to determine if you can really afford a mortgage is to calculate the monthly payment by how much income you earn. A good rule of thumb is to not spend more than 25% of your take home pay on housing/rent payments. This gives you more flexibility in the event of an emergency or if other problems arise.
Do you have extra money to cover emergencies and other repairs?
Speaking of emergencies, I highly suggest you have extra money stashed away to cover any unexpected expenses, like repairs and maintenance issues. If something can break, it eventually will and you don’t have the luxury of calling the landlord to fix it.
Speaking of emergencies, I highly suggest you have extra money stashed away to cover any unexpected expenses, like repairs and maintenance issues. If something can break, it eventually will and you don’t have the luxury of calling the landlord to fix it.
If you (or your spouse) lost your job, could you still make the monthly payments?
In the event that you or your partner lose a job, you should have a cushion of cash saved up to make the mortgage payments, at least for a month or two. This will give you time to find a new job, recover and get back on track. If you can barely make ends meet, buying more house than you can afford is a disaster waiting to happen (trust me, I learned from experience).
In the event that you or your partner lose a job, you should have a cushion of cash saved up to make the mortgage payments, at least for a month or two. This will give you time to find a new job, recover and get back on track. If you can barely make ends meet, buying more house than you can afford is a disaster waiting to happen (trust me, I learned from experience).
When purchasing a home you need to think about all the incidentals, emergency expenses and small things like yard maintenance and other repairs. You need to leave yourself enough wiggle room in your budget. If you want to be a homeowner, you have to expect the unexpected.\
Courtesy of Careful Cents
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