Tuesday, January 29, 2013 / by Sandra Wimett
Deciding how much to spend on a house is quite tough at times. You see a property and you like it so much that you are willing to pay thousands of dollars more for it. However, a word of caution is that you need money for other purposes in life such as education, entertainment, general monthly living expenses and savings. So, many financial advisers say that the debt to income ratio should not be in excess of thirty six percent for all home buyers. Apart from this, you should have at least six months salary in cash in your savings bank account. In todays uncertain times this cash helps to protect you and your family from lifes sudden changes.
The size and value of the home you choose will depend on your yearly income. If the income is high, naturally your purchasing power would be more and you would be in a position to buy an expensive home. You will have to compromise on your home price if your income is fluctuating, or not constant. You also need to take into account the existing loans you have taken and how much interest you are paying on them. The tenure of these loans should also be taken into consideration before you apply for a home loan, as home loans are of long period. So, your car loans, personal loans and credit card loans should be taken into account before you opt for a home loan. Ideally, the home loan amount should not be more than five times your yearly income.
There is a specific calculator that explains how much house you can afford, which will subtract all your mandatory expenses from your total income and give you the investible surplus. The following items will have to be treated as expenses while deciding how much loan you can afford:
Real estate taxes
Car payment (Usually a large payment. If you are thinking of purhasing a home it is best not to take on a car loan)
Credit card payment
Student Loans (Usually a large amount and can lessen the amount you qualify for on your mortgage)
While deciding to buy a house, you need to consider the rate of interest being charged by your lender, and the period of the loan. It is best to talk with a local lender and go over all the programs that are available to you. I am also very knowledgable in Grant Monies that may be avaiable to help with your closing costs. After considering all these factors, you will be able to decide how much money you can afford to spend on your dream home. So, follow these instructions for a secure future and remember to work with a reputable Realtor.
Contact me anytime with any questions or if I can assist you or anyone you know with your real estate needs (585-455-2443)