At some point of time, every one of us salaried individuals must estimate the affordability of a mortgage loan to buy a house of our own. This article provides you with some pointers that will help you make an estimation.
Understanding the amount of mortgage one can afford is an extremely essential calculation for all budding home buyers. By knowing this, you will not stretch your finances unnecessarily and purchase a home that costs more than your repaying ability. There are many investment advisers who can guide you about how much you can afford, based on your monthly salary.
However, self research and calculations are also vital, because after all, you are the most knowledgeable person about your income, repayment capacity, and other financial responsibilities, as well as liabilities. Moreover, this WealthHow article will help you make a calculated decision.
Find Out How Much Mortgage You Can Afford
- Rule of thumb suggests that to be on the safer side, you should not borrow money in excess of one-and-a-half-times your gross annual income, for your home purchase.
- However, some surveys conducted by real estate experts and financial advisers suggest that you can think of buying a home which costs around two and a half times your gross annual salary.
- Another rule of thumb suggests that a mortgage payment should always be lesser than twenty eight percent of your total gross monthly income.
- Another important thing which we all have to consider before making any real estate investment is the property tax and home insurance costs. These costs will vary from place to place and hence, they will be adding to your total expenses. Ergo, you need to conduct a survey of these costs, before you actually pay the initial down payment to the builder for purchasing your home.
- Second mortgage loans can be secured only if you have a good credit score and have repaid all previous dues successfully.
- Fast or quick mortgage financing can be sought by being completely aware of the documents and procedures required by the lenders.
- Commercial mortgage brokers are available in plenty and you need to approach the reputed ones if you have keen interest in purchasing a property.
- Consistency of income is of prime importance, whenever you borrow money for buying a home.
- You are expected to pay a stipulated amount of money every month and hence, the salary or business income should be consistent enough to meet that demand.
- So, unless you become permanent in your service, you should not be in a hurry to buy your home.
- Take the inflation factor and rising costs into consideration, when making your decision.
- In this way, you will be able to allocate funds for other expenses and make sure that the monthly payments for your home do not put you in a tight financial position.
- The kind of mortgage rates you are being offered are also important factors to consider. To get the best rates, you should have good negotiating power and the ability to present your case in a systematic manner in front of the lenders.
Keep these points in mind while calculating your mortgage and you’ll definitely be able to quantify the risk involved, and make an estimate of the loan amount you could afford.