Title:
Can You Afford A
House?
Word Count:
775
Summary:
If you're a new
home buyer and you're wondering how much you can afford to spend on a new new
home, this article will help you answer that question.
Keywords:
bend oregon home
loan, bend oregon mortgage, oregon home loan, oregon mortgage
Article Body:
The time has come
to buy a house. Questions buzz around in your head like a swarm of angry bees:
“How much can I borrow? How much do I have to put down? How much will my
payments be?” Well, let me suggest starting with the “How much can I borrow?”
question. I know you should never answer a question with a question, but in
this case we need to ask a few more questions in order to figure out the answer
to our first question.
There are many factors you need to take into consideration when purchasing a
home. First and foremost, ask yourself what size monthly payment you can
afford. When determining how large a mortgage you can afford, be sure to factor
in all your current expenses such as car payments, credit card bills, student
loans, utilities, and the like. You may also want to factor in how much you
spend on things like entertainment, eating out, and traveling. You don't want
to add a mortgage payment and say goodbye to your social life. Instead, you
want to make sure that you're not overextending yourself financially and thus
ensuring the survival of your social life.
At the present time, most lenders will allow for a whopping debt-to-income
ratio of 45% - 50%. Your debt-to-income ratio is the sum of your mortgage
payment and any other credit card or loan payments, divided by your monthly
gross income. Lenders use this ratio to help determine your credit worthiness.
So, all of your revolving debts along with your mortgage payment divided by
your monthly gross income should not exceed the 36% - 45% debt-to-income ratio.
So, here’s a quick little formula to help you figure out how much you can
afford to put toward your monthly house payment:
--Multiply your gross monthly income by 0.45
--Subtract your non-mortgage debt payments from the result
--What's left is your allowable mortgage payment
So, if we have a couple with a combined monthly gross income of $5000 and they
pay $700 a month toward two auto loans and one credit card, they would qualify
for a monthly payment of $1550. Also, be aware that not all of your monthly
housing payment goes toward your principal and interest. A portion must go
toward homeowner's insurance and property taxes. I mention this because on most
mortgage calculators that’ll you use, you’ll need to enter these figures to get
an accurate idea of what your real monthly mortgage payment will look like.
Property taxes are typically a percentage of your home's assessed value. To
calculate property taxes, local jurisdictions generally multiply the tax rate
by a home's assessed value. For example, if you pay 0.5% in property taxes of
the assessed value, a home assessed at $250,000 would have a yearly property
tax bill of $1,250. In order to find out the tax rate, you will need to contact
your county tax assessor, or a local mortgage broker or bank may be able to
assist you. As for the homeowner’s insurance, your best bet is talking to a
local broker or bank to get a general idea of what it is for your area. Mortgage
calculators will ask you for a percentage rate sometimes and others will ask
for a yearly figure. It can be confusing for a new buyer, so don't be afraid to
seek a little assistance.
Figuring out how much you can afford to put toward your monthly house payment
is a start. Now, you want to know how much house you can afford. There are
mortgage calculators galore that will help you do this, but, as I mentioned
above, they will require you to enter real estate taxes, homeowner’s insurance,
and interest rates. Some calculators will provide you with figures, but they
aren’t necessarily correct, so I would suggest a little leg work. Once you know
how much you can comfortably spend a month toward a home, and you’ve gathered
your tax and insurance rates, you only need an idea of what kind of interest
rate you’ll get (Oh, did I forget to mention that you can call your local bank
or mortgage broker to get pre-qualified, and they usually don’t charge
anything?). Once you have an idea of what your interest rate may be, you can
plug in all your numbers on any of the numerous mortgage calculators on the
internet. Once you have a good idea of what you think you can afford, call a
local bank or broker and get pre-qualified to see if you’re in the ballpark,
and soon you’ll be on your way to owning
a home.