How to Calculate If You Make Enough Money to Cover Your Projected Mortgage
Buying a new home is going to be one of the most exciting things that you ever do, but you need to carefully look over your finances before you sign any paperwork. Getting a home loan that you can’t afford could wreak havoc on your finances and result in serious credit issues for many years to come.
Determine Your Current Household Income and Expenses
The first step in this process is determining your current household budget.
That budget should include how much money is being brought into the household every month, additional sources of income, and what your expenses look like every month.
Without that information, it will be nearly impossible to determine how large a mortgage you can get and what your finances are going to look like in the future.
You might also find some areas where you can save a little extra money by cutting back on expenses.
Speak with Lenders About Total Monthly Payments
Once you have determined your current budget, you will then need to speak with a lender like Choice Mortgage.
The loan officer will carefully look over your budget as well as your credit score to figure out what type of loan you qualify for.
As a general rule, lenders won’t approve a loan if the mortgage payments are going to eat up too much of your monthly income.
Consider Other Monthly Expenses
Your mortgage is probably going to be one of your largest monthly expenditures, but there are other expenses to think about as well.
In many locations, homeowners must pay a monthly or annual fee to their HOAs.
You might also have to pay for waste removal, home insurance, and a new home warranty.
If the home has new appliances or solar panels that were financed, then you will have to take over those payments as well.
Work on Improving Your Rates
Starting this process early on is a great idea because you might be able to improve your finances.
Increasing your credit score and tackling some of your current debt could have a huge impact on your interest rates as well as your monthly payments.
If you have multiple credit cards or loans, then you should also consider zeroing some of those out.
Even if it seems like you will be able to handle these monthly payments, you should still think about investing in a robust mortgage insurance policy.
That type of coverage will help you protect your finances if you ever miss a payment, and many lenders won’t approve a loan unless the applicant has a mortgage insurance policy.
Category: Mortgage
