Planning to buy a home is one of the biggest decisions you have to make in life. However, before buying it you must make sure, that how much house you can buy. This is important to know so that you can find out whether you will be able to pay all the taxes, mortgage and repair expenses.
Recently due to the mortgage crisis, lenders have made their standards strict. However, you should not lose heart as with the following given steps you can easily find out how much you can afford while buying a house and then make the right decision:
Keep the simple rule in mind that your mortgage value should not be more than three times of your annual salary. In case you might lose your job or one of you is looking forward to leaving the job because they want to raise a child then you should wisely select the house with low mortgage value. Select the house with the mortgage value that will not alter the obligations that you have to follow. Because then you can easily manage your expenses and the price you have to pay for the house.
Payment to paycheck ratio:
Another way to conclude it is that the payments of the house should not enhance more than 28% of your monthly income before any deduction is made. You must know that the low yearly mortgage value will have a high monthly payment but it includes less interest. You can easily stretch your budget by selecting the plan that will make you pay slowly. It will not burden you and you will get a stable situation.
What was the last time you checked your credit score? For buying a house your credit score must be good and you must check it after every few months. Credit score affects the approval of your mortgage and the rate of interest. If you have a low credit score that means you are poor in debt payments and it will give a bad impression on your case. To deal with such situation you can have a credit report and get the issues solved before it is too late.
Your down payment:
While buying the house you also have to make sure that you are saving almost 20% of your income for any emergencies. If you make your down payment less than 20% of your income then you will have to pay more interest leading to a waste of your money. This payment will also help you deal with situations like pest infestation, roof leakage or replacing the old appliances and worn out furniture. So if you do not have the required down payment for your house you must keep saving and buy a house that is not very expensive.
So follow the instructions and calculate how much house you can afford and then wisely make your investment so you will not have to suffer in the future.