subject: How Much Can You Afford When Buying A Home? [print this page] You've taken the first step, making the decision to buy a home, but have yet to decide on a budget. Not so fast, old buddy - don't make that home purchase without taking into consideration the amount of mortgage payment you can afford.
Mortgage Payments
Talk to a mortgage lender who is experienced and in the know - he or she will give you a better idea as to how much you can afford. Then the next step would be to "test" the loan application until you have a pre-qualification letter in hand. Once you have a pre-qualification letter, this will tell both you and the seller how much you can borrow for a home loan.
Next rhetorical question - does having the loan in your possession mean that the amount on there would be how high you can go? Rhetorical answer - too early to tell. Remember that the prequalification letter is based on your credit and your monthly income - a slice of your life, but not your entire life. But it is not to be misconstrued as who you are - please do not resort to this pitfall!
Other Expenses
Oh, the agony - that is the most common reaction of people who buy a new home while being strapped with monthly mortgage payments. This is an end result of the home buyer being too excited about the pre-qualification letter, too optimistic for his/her own good. So you've got your dream home, good - but those nightmare payments are another thing all together!
Before the home purchase, as you ascertain how much you can afford to spend, it is important to consider your financial situation and cover all bases. Although you may be in a decent financial situation at the moment, do you have future expenses that will put pressure on your finances? Such situations might include:
Planning to have kids in the next year or so?
Do you have plans to attend college, or are your older kids going there soon?
If you own a business, is the financial outlook stable?
If you are a corporate employee, are you confident that your job is secure with no chance of retrenchment or layoff?
And is the trend of downsizing causing concern for your business or the company you work for?
If you are the only bread winner in the family, what's to do if you have health problems that would force you to miss a few months of work?
These general questions are intended to wake you up to the possibility of over extending yourself on a mortgage. So before you commit to a mortgage, do not just think of the here and now - think of what the future may hold and see how you stand in life before making a decision.
