Potential home buyers have to decide how much they can afford to borrow from a home mortgage loan. How much of a home mortgage loan you can get will depend on how much you spend each month and how much money your household makes. You don't want to have to skimp and save every month to pay your home mortgage loan. So what do you do?
Take care of your money.
When you are ready to buy a home, you will need to do some math to figure out how much you can spend on a home mortgage loan. First, you need to figure out how much of a down payment you can afford and subtract that amount from the price of the home. What's left is what a home mortgage loan will be used to pay for. Before you can figure out how much you can spend each month, you need to add up all of your other bills.
The price of a home
The taxes, interest, and principal on a home mortgage loan shouldn't cost more than 25–28% of your gross income before taxes each month. This number will also be affected by how much debt you have to begin with. You'll also need to think about how much it will cost to run your new home.
You still owe money.
To get this number, you will need to add up all of the money you owe, including your home mortgage payment, credit card bills, child support or alimony payments, student loans, and any other debts you have. This number shouldn't be more than 35% of your gross, before-tax income.
The rate you get will depend not only on how much money you make but also on how much debt you have. This is called the ratio of your debts to your income. If you have a lot of debt, your rate won't be as good as those for people with less debt. It is up to you, not the lender, to figure out how much you can pay each month on a home mortgage loan.
What to watch out for when looking for a home loan
There are a lot of dishonest lenders on the lending market whose only goal is to make a sale. That's why it's so important to know what's going on with your money. Many times, loan officers for home mortgages will try to get you to take out a higher loan for a house you can't afford.
Loan officers know that most of us pay our mortgages as our first bill. They also know that your home mortgage loan will soon be sold to another company and that it won't be their problem if you have trouble paying it back. They will have already gotten their money and moved on to the next customer, leaving you with payments you can't make.
Before you decide how much to spend on a new home, do your research. Think about all of your monthly costs, not just your debt and rent. You will have to pay for food, electricity, phone, insurance, and the many other costs that come up every month. Before you sign for a home mortgage, be a smart borrower and know all the facts.
