When you buy a house, you’re making a major financial commitment that will impact your life for years to come. Before you start house hunting or apply for a mortgage, you must have a clear understanding of what you can afford to pay each month. Although you may get approved for a high loan amount, it doesn’t mean you should aim to spend it all. According to the real estate agents at EXIT Bayside Realty in Boston, MA, the more prepared a buyer is with a realistic budget, the more successful they will be in their homeownership venture.
They’re here to explain how to carefully plan a budget and calculate a manageable mortgage payment:
- Factor in Income & Down Payment Savings: The first thing you want to look at is your gross income. This will significantly affect what you can afford to pay as well as what your lender approves you for. When you buy a house, make sure your mortgage doesn’t exceed 28% of your income. You also want to factor in your down payment because the more you pay initially, the less your monthly payment will be.
- Consider All Current Debt: Next, you must consider all the debt you currently owe. Your obligations to other loans and credit cards will have a considerable influence on your budget. Add up all the debt you have, looking at the actual balances and not just the monthly minimums, to calculate your total expenses for a month.
- Think About How Comfortably You’re Living Now: Finally, you want to think carefully about how comfortable you are with your present financial situation. If you’re renting, you can use this as a guide to identify if you’re struggling to keep up with your bills or if you think you could actually afford a little more in a mortgage payment and remain in a comfortable position.
Using these tips when you’re ready to buy a house will help you to avoid stretching beyond your means. Getting your mortgage budget just right will also determine what size house you can afford to purchase. Contact EXIT Bayside Realty at (617) 265-6111, or visit them online to learn more.