House hunting can be a brutal affair, particularly if you don't know what you can afford before hand. By knowing your price range in advance, you can then avoid looking at really nice homes you can't afford.
Monthly Payments and Mortgage
In owning a home, the biggest costs associated with it is the mortgage. You are committing to apportioning a significant amount of your monthly income to that dream home unless you have a lot of money. In evaluating whether you can afford the mortgage, you need to consider the difference between the mortgage payment and what you are currently paying.
If this step up is significant, do you think you will be able to pay it now and in a few years? Assuming that you will make money in the future is what you need to avoid doing. Base everything on what you are making now.
The type of mortgage is what you also need to factor when considering the monthly mortgage payments. For some time, interest rates have been at historical lows but are starting to creep up. Will you be able to make the payments if the interest rates increase over the next few years if you are taking the plunge on an adjustable mortgage? In conclusion, assuming that the rates will go up to the caps indicated in the mortgage for the relevant period of time is what you need to do then. Getting stuck in a financial blind is something you wouldn't want to end up in just because you allowed your eyes to overrule your brain when choosing a home.
What about Other Expenses?
With the pride of homeownership comes the few extra costs. In gauging affordability, many homebuyers fail to take into account the twin evils of property taxes and homeowner's insurance. Associated with each of these necessary items are certain expenses and they can be surprisingly high. During the first year of homeownership, property taxes can be an ugly surprise in some states. They are like taxes where they are collected in a lump sum and can be thousands of dollars. If you fail to plan for them, your finances can become unbelievably strained.
Buying a home is absolutely the best move you can make if you're renting. Just make sure you can meet those payments without losing sleep.
Monthly Payments and Mortgage
In owning a home, the biggest costs associated with it is the mortgage. You are committing to apportioning a significant amount of your monthly income to that dream home unless you have a lot of money. In evaluating whether you can afford the mortgage, you need to consider the difference between the mortgage payment and what you are currently paying.
If this step up is significant, do you think you will be able to pay it now and in a few years? Assuming that you will make money in the future is what you need to avoid doing. Base everything on what you are making now.
The type of mortgage is what you also need to factor when considering the monthly mortgage payments. For some time, interest rates have been at historical lows but are starting to creep up. Will you be able to make the payments if the interest rates increase over the next few years if you are taking the plunge on an adjustable mortgage? In conclusion, assuming that the rates will go up to the caps indicated in the mortgage for the relevant period of time is what you need to do then. Getting stuck in a financial blind is something you wouldn't want to end up in just because you allowed your eyes to overrule your brain when choosing a home.
What about Other Expenses?
With the pride of homeownership comes the few extra costs. In gauging affordability, many homebuyers fail to take into account the twin evils of property taxes and homeowner's insurance. Associated with each of these necessary items are certain expenses and they can be surprisingly high. During the first year of homeownership, property taxes can be an ugly surprise in some states. They are like taxes where they are collected in a lump sum and can be thousands of dollars. If you fail to plan for them, your finances can become unbelievably strained.
Buying a home is absolutely the best move you can make if you're renting. Just make sure you can meet those payments without losing sleep.
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