If you are about to buy a house, whether it is your first time or your third, it is crucial to really understand your mortgage and how it works, since it will probably be the biggest you will take out during your life. In the most basic sense, a mortgage is a loan you take out to purchase a property. Being able to secure a mortgage depends on on lender approval based on your income, credit rating and ability to pay considering your other debt, such as credit card debt.
Before you decide on what you can or should spend on a mortgage, it’s important for you to take an honest look at your spending habits and your true fixed expenses. You probably already know that you should most certainly include your student loan payments, car payments and monthly utility bills on your household budget, but you should also consider your other spending habits and ask yourself honestly whether or not you can realistically change those habits in order to get a bigger mortgage. For example, if you’ve made it a daily habit to have a cup of gourmet coffee, do you honestly believe you can break that habit and give it up completely? If not, you may want to consider counting that as a fixed cost.
According to experts, your monthly housing costs should amount to less than 30% of your gross monthly income, and your entire monthly debt load should amount to less than 40% of your gross monthly income. These are safe parameters to work within to ensure that you don’t take on a mortgage that you will ultimately end up struggling to repay.
Once you’re ready to take out a mortgage, you will have some decisions to make as to interest rates (whether fixed or variable) and terms (usually ranging from 15 to 30 years.) Again, these are decisions that will have a long-term impact on your monthly household budget, so it pays to do your research and perhaps consult with a knowledgeable professional so that you can make the best decisions for you and your family.
Owning a home can be a truly amazing thing, but it does require a lot of responsibility. Fortunately, these days there are abundant resources that can help you make sound decisions, and reputable professionals who would be more than happy to help you. 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!
