Okay, you've decided to buy a home and are trying to figure out what you can afford. But before you go whole hog and buy a home, you should always think about how much you can afford in terms of mortgage payments
Mortgage Payments 101
The first step you should take in determining what you can afford is to talk to a mortgage lender. Then the next step would be to "test" the loan application until you have a pre-qualification letter in hand. A pre-qualification letter tells you and a seller how big of a home loan the lender will give you.
So, once you have the loan in hand, that must be the amount you can afford? That is not for you nor anybody else to say yet. Remember that the prequalification letter is based on your credit and your monthly income - a slice of your life, but not your entire life. But it is not to be misconstrued as who you are - please do not resort to this pitfall!
Other Expenses
Nothing gets the dopamine pumping (read - nothing stresses a person out more) than simultaneously buying a home and paying monthly mortgage installments. This is an end result of the home buyer being too excited about the pre-qualification letter, too optimistic for his/her own good. Your home may be straight out of a Frankie and Annette beach movie (albeit in modern setting), but why are your payments straight out of Elm Street?
Before the home purchase, as you ascertain how much you can afford to spend, it is important to consider your financial situation and cover all bases. You want to avoid surprises - your finances may be all rosy and in good health as of the here and now, but the future may bring a sea change you may not be prepared for. Here are some situations:
Are you planning to have more children in the near future?
Are your elder children going to, or currently attending college?
If you own a business, is the financial outlook stable?
For employees working in a company, is the company stable and is it still in synergy despite the changing times?
Are the demons of downsizing too powerful for your business or company to overcome?
If you provide the only source of income, do you have any potential health problems or contingency plans should you miss some time at work?
Ours is a time of great uncertainty - a lot of us are no longer spring chickens, and regardless of how old or how young we are, over-extending a mortgage is a situation to avoid. One cannot predict the hand Lady Luck will draw for us from her deck of cards, but you can always be prepared and plan ahead before committing to that home loan.
Mortgage Payments 101
The first step you should take in determining what you can afford is to talk to a mortgage lender. Then the next step would be to "test" the loan application until you have a pre-qualification letter in hand. A pre-qualification letter tells you and a seller how big of a home loan the lender will give you.
So, once you have the loan in hand, that must be the amount you can afford? That is not for you nor anybody else to say yet. Remember that the prequalification letter is based on your credit and your monthly income - a slice of your life, but not your entire life. But it is not to be misconstrued as who you are - please do not resort to this pitfall!
Other Expenses
Nothing gets the dopamine pumping (read - nothing stresses a person out more) than simultaneously buying a home and paying monthly mortgage installments. This is an end result of the home buyer being too excited about the pre-qualification letter, too optimistic for his/her own good. Your home may be straight out of a Frankie and Annette beach movie (albeit in modern setting), but why are your payments straight out of Elm Street?
Before the home purchase, as you ascertain how much you can afford to spend, it is important to consider your financial situation and cover all bases. You want to avoid surprises - your finances may be all rosy and in good health as of the here and now, but the future may bring a sea change you may not be prepared for. Here are some situations:
Are you planning to have more children in the near future?
Are your elder children going to, or currently attending college?
If you own a business, is the financial outlook stable?
For employees working in a company, is the company stable and is it still in synergy despite the changing times?
Are the demons of downsizing too powerful for your business or company to overcome?
If you provide the only source of income, do you have any potential health problems or contingency plans should you miss some time at work?
Ours is a time of great uncertainty - a lot of us are no longer spring chickens, and regardless of how old or how young we are, over-extending a mortgage is a situation to avoid. One cannot predict the hand Lady Luck will draw for us from her deck of cards, but you can always be prepared and plan ahead before committing to that home loan.
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