Finding A Mortgage You Can Live With
Every realtor in the country is claiming that now is the best time to buy a home. You need to think carefully about money before you drink the Kool-Aid and jump into mortgage debt that your personal budget cannot support. Your credit future and your future financial position are as important as your desire to live the dream of home ownership.
Preparing yourself for owning a home requires a defined plan of financial analysis on your part. Do not expect someone that is eager to sell you a house or thrilled at the possibility of scoring a loan to be exactly honest and completely truthful about how much house you can afford. There are people that are honest but you will find that doing the homework yourself is better than taking another person’s word that will not be responsible for the mortgage debt.
You must determine what your real income is, what your personal debt is, how much you will be paying for utilities, and what your loan options are. Take tax changes and insurance into consideration.
Real income is net income. This is money that you can actually spend. You need to use the income that you presently have in your calculations. Do not include expected raises or hoped for new job income. You should include dividends from any stock that you do not plan to reinvest.
Personal debt is unpaid credit card debt, auto loans, and student loans. All of the debt that you pay is not available for you to calculate a repayment plan or a term of the loan. Minimization of debt prior to applying for a loan makes your credit rating better and allows you to pay mortgage debt off easier.
Talk to people that own homes of similar size and location about how much they pay for utilities. You want to live comfortably in a new home so planning your personal budget to include utility costs is a must.
You must consider the cost of taxes on a home as part of your budget. Homeowners insurance is a necessity for getting a loan and that cost should be deducted from the amount that you can really afford to pay for a home.
You now have a good picture of your budget and can begin calculating the repayment plan that you can afford and still live. A repayment plan is usually 15 or 30 years. You can shorter the time substantially by paying a little extra per month. The extra that you pay pays off principal and reduces the amount of interest that you pay.
The bottom line is you need to do the work that is required for owning a home before you just jump in.