Searching for a new home is an exciting adventure. As much as you’d want to settle on a dream house as soon as possible, however, preparation is necessary. A new home is a serious investment; you cannot just dive into it unprepared. Before you enter the market, consider the location, your family’s requirements and most importantly: your finances.
Never take finances out of the equation. It’s impossible to settle on a home without knowing the price; otherwise, you might end up disappointed.
VIP Mortgage, a local mortgage provider, understands the struggle of homebuyers, especially first-time seekers. To ease the financial worries, the mortgage expert recommends partnering with a reliable and trustworthy mortgage company in Phoenix – one that will provide you with the best possible offer and interest rate. But before you say yes to any arrangements, conduct a thorough assessment of your own finances first.
Calculating your budget
Although each lending institution has its own business model, they have similar policies when it comes to what “affordable” is. According to the general guidelines, this means summing up all your debts and ensuring that they don’t go beyond 36% of your income after tax.
Take note that you should include everything you owe during the calculation. Apart from potential home loan payments, take into account your outstanding credit card bills, car loan payments, and student loans among other debts.
The idea behind the 36% (or below) limit
Why should you have a 36% (or less) limit when computing how much you can afford? Some financial experts claim that this is the range that majority of borrowers are capable of paying. Keep in mind though, that this does not include private mortgage insurance yet, which your lender may require in case you cannot meet the necessary down payment (typically 20% of the total purchase price of the property).
Home ownership is a milestone any individual’s life, but make sure have a well-rounded understanding of the costs of buying a home. This way, you won’t find yourself worrying about finances.