subject: 5 Considerations When Applying For A Mortgage [print this page] Regardless of the lender and regardless of how much money you can qualify for as a mortgage you should be considering your own finances and what you feel comfortable carrying as a mortgage when shopping for a new home. Remember that no matter how financially desirable home ownership is it can still backfire on you and ruin you financially if you go too far in debt to buy a home that you really cant afford. You should consider these 5 points.
1. How much can you afford monthly? Your lender will use a formula, taking into consideration your debt load, your income, your credit score etc to determine the amount of money they are comfortable lending you. Remember that you do not have to borrow this amount. It is a maximum. Consider the payment that you feel comfortable with and borrow an amount that will put you in that payment range.
2. Remember that in addition to your payment each month you will have property tax, utilities, repairs, and other maintenance to pay for. Also realize that in addition to your downpayment you will have conveyancing and lawyers fees, as well as other taxes. These must either be paid up front or they will be added to amount you are borrowing and effect your final monthly payment.
3. Consider other debts that you are carrying, car loan, credit cards, consumer loans etc. Also consider that the purchase of a home may necessitate the purchase of other items to furnish or equip your new home. This may increase your debt load in ways you havent considered. If the home you buy needs renovations, make sure that you have put financing in place to carry out this work before buying and that you will be able to afford the combined payment.
4. In relation to debt servicing you should ask yourself if and in what ways you are willing to curb your current lifestyle to afford this new home. This might mean not going out for dinner as often or it might mean putting off starting a family for a while.
5. The final aspect of getting a mortgage that is worth thinking about is your Plan B. This means if you loose your job or other source of income, how are you going to continue paying your mortgage? It may be possible using a spouses income, it might mean cashing in other investments, or using savings. There should be a Plan B for paying otherwise Plan B will be your lenders plan and that is foreclosure and financial ruin for you.
Consider these 5 points when contemplating home ownership and you will steer clear of common pitfalls. PEI real estate offers some inexpensive and less risky ways to enter the real estate market.
