If you are in the market for a new home, this is a wonderful time to buy and get great deals. But before you find that perfect dream home, you need to make sure that it fits within your budget. When you are trying to determine what mortgage you can afford, there are some things you want to consider - like the cost of a down payment vs. monthly payments, what your salary will finance and debt-to-income ratios.
The "Salary Rule" says that the cost of your home should be approximately two and a half times your annual salary. If you follow this rule, it will keep you from getting in over your head.
Pay close attention to your debt-to-income ratio. The banks will not loan to someone who has a ratio higher than 36%. To remain financially sound, it is a good idea to keep this ratio less than 30%.
If you are interested in buying a primary home, your down payment is going to need to be at least 3.5% of the cost of the property. Many individuals decide to put down more than this, but most lenders will not approve a loan unless you have at least this much. You should also compare your down payment with ongoing monthly payments and determine what is best for your lifestyle. Remember to figure out how much you will be spending in interest over time, as well as if the monthly payments will fit into your current budget.
You have a variety of financial (and emotional) needs - buying a home is just one of them. Be sure that you consider everything from retirement to education to entertainment to travel when you are deciding on the ideal cost for your home. Your mortgage payments should feel comfortable and leave enough money for your other needs (as well as some savings and some "rainy day funds").
Knowing your price range and your budget will make house hunting a fun, stress-free experience. Do some research - find a good broker who has experience, compare rates and terms of various loans, get pre-approved. All of these step will make the process go much more smoothly.
The "Salary Rule" says that the cost of your home should be approximately two and a half times your annual salary. If you follow this rule, it will keep you from getting in over your head.
Pay close attention to your debt-to-income ratio. The banks will not loan to someone who has a ratio higher than 36%. To remain financially sound, it is a good idea to keep this ratio less than 30%.
If you are interested in buying a primary home, your down payment is going to need to be at least 3.5% of the cost of the property. Many individuals decide to put down more than this, but most lenders will not approve a loan unless you have at least this much. You should also compare your down payment with ongoing monthly payments and determine what is best for your lifestyle. Remember to figure out how much you will be spending in interest over time, as well as if the monthly payments will fit into your current budget.
You have a variety of financial (and emotional) needs - buying a home is just one of them. Be sure that you consider everything from retirement to education to entertainment to travel when you are deciding on the ideal cost for your home. Your mortgage payments should feel comfortable and leave enough money for your other needs (as well as some savings and some "rainy day funds").
Knowing your price range and your budget will make house hunting a fun, stress-free experience. Do some research - find a good broker who has experience, compare rates and terms of various loans, get pre-approved. All of these step will make the process go much more smoothly.
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