Before You Buy

Before the search begins for a new home, it is wise to take a look at your financial situation.  Before you buy a home, seriously consider what you can afford.  The following are some tips I’ve put together to help you determine what monthly mortgage payment is a good fit for your budget. 

How do lenders determine what I can afford?

When it comes to monthly payments, most lenders use a percentage of your gross income to determine what mortgage payment you can possibly afford. Most lenders prefer your mortgage payment to be 29% or less of your gross income (before taxes).   They also normally require a down payment of 2-20%, however, in some cases, there are programs that go as low as 0% down.  Everyone’s situation is different, so this is something that you will want to discuss with your mortgage consultant.   

Are there different kinds of mortgages available?

Yes, indeed, there are.  For the majority of home buyers the choice will be either a fixed rate or variable rate mortgage (also called ARMs, or adjustable rate mortgage).  Fixed rate loans are constant; the interest and mortgage payments stay the same throughout the life of the loan.  A variable rate mortgage is based on financial indexes, and fluctuates as often as your individual contract indicates. Read the fine print closely before you sign the contract.  Each of these loans has its advantages and disadvantages and you will want to ask your mortgage consultant not only to discuss current mortgage rates, but also to discuss anything that you do not completely understand.

There are also FHA and VA loans available for those who qualify.  These loans often require a lower down payment, have lower interest rates, and are more flexible when it comes to financing. 

What should I bring with me when I confer with my mortgage loan consultant?

Generally, the following information is necessary:

• Residence history
• Proof of current income
• Employment history
• Social Security numbers for all applicants
• A record of assets
• Confirmation of all debts
• Proof of alimony and/or child support payments received or paid out (optional)

 

Once you have determined what the lender says you can afford, it is time for you to apply your own personal knowledge of your capabilities and spending habits to find that perfect fit.  Below is a chart that contains valuable information concerning loan amounts and payments:

 

Now that you have a clear idea of what you can afford, let’s go look at some houses!  I am sure I can find you the home of your dreams! Give me a call at (513) 777-2402 and let’s get started!