What type of house can I afford?
If you are asking this question, then you are probably one of the several people looking to purchase a new home but who isn’t particularly certain about their financial ability to make this investment.
+Determining the Mortgage you can afford
If you are struggling with the notion of investing in a new home, there are numerous resources on the internet designed to help you meet this specific need.
Most of them are calculators that, once you enter the necessary details, will provide you with an accurate estimation of the house you can afford based on your unique financial situation.
Most calculators primarily focus on comparing the portion of your monthly income that you spend on paying your existing debts with the extra money you have leftover at the end of the month and which you can then use to make your mortgage payments, some of those factors you must take into account to determine the house you can afford including the following:
You must take into account the total amount of income you earn at the end of each year, this including all bonuses, commissions, tips, alimony, child support and any other source of money that contributes to your annual income before taxes.
Factor into your calculations the total amount of money you will need to put forward as a down payment on the house of your choice.
You need to ensure that this amount can cover the down payment as well as any unexpected financial emergencies that might emerge.
Determine the portion of your money that you spend on making monthly payments on your debts, this including student loans, alimony, rent and credit card payments to mention but a few.
Exclude any house payments that will be rendered obsolete once you secure your new mortgage.
How much money do you pay to the government in taxes every month? This figure should include estimated property taxes and income taxes.
Taxes tend to vary with each country and state.
When you are negotiating with lenders, a lot of them will require their clients to invest in hazard insurance as a means of protecting the home in question against damage from events such as fire, burglary, storms and explosions to mention but a few.
As such, insurance should factor into your overall estimation.
Along with other factors like credit history and front-end ratio, while online mortgage calculators are often an effective means of determining what type of house you can afford, it might be in your best interests to consult a financial planner that can provide you more accurate estimations.