Investing in your own house can be everything from exciting to stressful. Looking over the properties and seeing what you can afford is a lengthy task. You need to devote a chunk of your time too, as you would be living in this house for a long time. It is thus best to involve yourself in every decision. Many of us cannot afford to dush out a large amount of cash to buy a house. It is also not a prudent decision as spreading the cost over the years should be your priority. You should opt for a mortgage whenever buying your house to get the benefits. However, it is a different picture determining what you can afford.
Deciding the optimum mortgage range isn’t easy. While the banks might offer you more but you need to ensure that you can afford the amount. Missing out on payments can lead to a bad credit score, and you may even lose the house. Therefore, it is essential to choose the terms that are suitable for you in the future as well. Hiring a reputed mortgage broker is also an excellent choice. They can do the work for you, and you can just relax.
Let’s see the steps to determine the optimum mortgage amount for yourself:
A mortgage pre-approval can help see whether you’re in a good credit position for a mortgage. Also, you can get a range of the mortgage amount you can get. However, this shouldn’t be your benchmark. Lenders or banks may offer you more than what you can afford, just as they would benefit from a bigger loan. The pre-approval is only to see where your credit rating stands and whether you can easily get a mortgage or not.
You should then determine your savings after the general expenses. It should include everything from your living to food expenses. Subtract all those amounts from your income and see what is left. The remainder should have a fraction of savings for unexpected expenses, and the rest is your monthly mortgage amount. Some experts suggest keeping the mortgage installment at 25% to 28% of your monthly income. You should account for all the expenses you incur regularly.
Living in a new house requires a lot of money too. From renovations to furniture, you should have money for that too. The house would also need maintenance which is another major cost. You need to estimate these expenses and account for them into your monthly income.
You should have the monthly amount by now. The final thing is to analyze and decide if you can afford that. Realistically ask yourself if you can spare this amount each month and still maintain some savings for other expenses. If yes, you should go ahead with the mortgage. However, if you think you cannot, you should revise your mortgage terms and opt for a longer period.
Determine this now to see the amount you can invest in your new home purchase. You can also use the mortgage calculator to get a quick estimate .