Though getting pre-approved for a mortgage can help you determine your maximum loan amount, you really want to focus on your monthly payment. Experts suggest spending no more than 30 percent of your monthly income on housing, so sit down and do the calculations.
After adding up your income, your spouse’s and any other earnings you take in each month, what does 30% come out to? You can also use a mortgage calculator to home in on this number.
You’ll also need to factor in the extra costs of homeownership. Unlike when renting, you’ll need to cover property taxes, homeowner’s insurance, hazard insurance, repairs, maintenance and utilities. Depending on your down payment amount, you might need private mortgage insurance as well. These all add both monthly and annual costs to your bill.
Here are a few tips for minimizing mistakes during your calculations:
- Ask your agent and lender for help. Your agent should be able to get you accurate property tax and utility information, while your lender can breakdown the full estimate of costs you can expect each month.
- Shop around for insurance. Homeownership quotes vary, so get quotes from a few different companies.
- Start saving for repairs and maintenance now. Stow away some cash in a rainy day fund for general upkeep and repairs. You can expect to pay about 1 to 3 percent of the home’s purchase price in these costs annually.
And remember: Just because a lender says you’re qualified for a $500,000 loan doesn’t mean you’ll be able to comfortably make the payment that comes with it. Make sure you have an accurate estimate of your monthly mortgage costs before moving forward with any purchase.
The information contained on this website is for informational purposes only and is not an advertisement for products . The views and opinions expressed herein are those of the author and do not reflect the policy or position of Brokerage. Source: The Mortgage Reports