For most people, a mortgage is the biggest loan of their lives. If you are hoping to become a new home owner soon, it’s important that you really understand your mortgage and how it works. A mortgage in the most basic sense is a loan given to you by a bank or lender for the purpose of purchasing property. Your ability to get a mortgage and the amount you will be allowed to borrow will depend on your income, your credit rating, and your other debt. Now that you have an idea of what a mortgage is, here are three rules to follow so you won’t end up getting overwhelmed:
1. Take an honest look at your finances, income and spending habits before you even begin to decide how much to spend on a mortgage. Make a list of your non-negotiable, absolutely essential monthly expenses, including your household budget and other debt such as credit card, student loan and car loan payments. The total amount will be your fixed cost. Then compare that against your monthly income to get a better idea of how much mortgage you can truly afford without getting in over your head.
2. Get a mortgage you can afford. According to experts, in order for you to stay financially healthy while paying off your mortgage, you should strive to keep your monthly housing costs down to less than 32% of your gross monthly income. Going a step further, your entire monthly debt load including credit card payments, car payments, students loans, etc. should amount to less than 40% of your gross monthly income. Keep these figures in mind when you start shopping around for a mortgage, so as not to end up borrowing an amount you will eventually struggle to pay back.
3. Pick the right interest rate. Understand that mortgages come with different interest rates, payment schedules and amortization periods. Do your research and consult with knowledgeable and experienced professionals in order to determine the best terms for you and your lifestyle.
If you are planning to buy a home, let The Incorvaia Team make the process as easy as possible for you. Call us at 440-879-7130 today!
