December 20, 2012
Planning to purchase your dream abode? Do you have sufficient bucks? For most people, taking out a mortgage loan to purchase their home is one of the biggest achievements that they make in their lifetime. You should make it a point to take out the mortgage loan from the right lender. The mortgage lenders usually use standardised financial ratios in order to find out how much home loan you can afford to take out. However, though the lending requirements have tightened significantly after the housing bubble burst in the year 2008, a lender still may approve you a loan beyond your affordability or suggest a mortgage that is not suitable for you. Fortunately, there are a number of proven approaches to find out “I want to buy a new house how much can I afford”.
5 Ways to calculate your house payment within your affordability
Read on to know about the 5 ways to calculate your house payment within your affordability.
1. Check your debt to income ratio – According to the financial experts, you should try not to spend more than 36 percent of your income on paying off the debts. This should include the mortgage payment too. If you are making payments on two student loans, two cars and several credit cards, then you will have less money left for your mortgage payment.
2. Make use of gross salary ratio – The financial experts believe that you should not buy a house for more than 2.5 times of your gross salary. Find out “I want to buy a new house how much can I afford” so that you may be able to repay the loan on time. So, if you are earning a gross salary of $65,000 and your spouse earns $52,000, you should search for homes that cost less than $292,500 or 2.5 times $117,000.
3. Make the necessary down payment – The mortgage lenders require home buyers to buy private mortgage insurance (PMI) when the loan offered is more than 80 percent of the purchase cost. But, if you only look for the homes for which you’ll have to make 20 percent down payment, then you will be able to avoid these extra costs.
4. Use the 15-year mortgage approach – You should consider only those homes for which you can make the15-year mortgage payments using only 25 percent of your monthly income. This way, you will be able to pay off your mortgage loan within a definite time period.
5. Choose the one income approach – Search homes for which you and your better half can qualify by using only one of your salaries. This will enable you to manage your financial difficulties wisely. It will also provide you the financial freedom to change careers or have your partner leave job to take care of children or elderly parents.
By following the above ways, you will be able to calculate your house payment within your affordability.