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Jamie’s Hot Home-buying Tips

How much can you afford?

  • Consider your annual household income. This is a key factor when determining how much of a mortgage you can afford. In addition to calculating your annual household income, consider any income changes that may impact your ability to make your payments. For example, if there are currently two major income sources within your household, would you still be able to afford your mortgage if one was removed? What if a child comes into the picture and your partner decides to become a stay-at-home parent? Consider all factors before deciding.
  • Consider your down payment. Currently, you are required to have at least a 5% down payment when buying a house. The size of your down payment is one factor in determining the size of mortgage you can afford.
  • Consider your debt. When determining “How much can I afford?” one of the other important factors to take into account is the amount of debt you currently have. The lower your debt-to-income ratio, the more money you’ll likely have to put towards your mortgage. In addition, your debt level will also help to determine how large of a mortgage you will qualify for.
  • Consider your amortization period. If you are simply trying to keep your regular mortgage payments low in order to comfortably fit the payment into your budget, you will probably want to apply for a mortgage with a longer amortization period. However, if you don’t mind a somewhat larger regular mortgage payment in order to save money on interest in the long run, you may want to consider a shorter amortization period.
  • Consider your closing costs. Closing costs, such as home inspection fees, appraisal fee, property survey, land transfer tax if applicable and legal fees are an often overlooked expense that will definitely help determine how much money you can afford as a down payment.
  • Consider your property taxes, various types of homeowner’s insurance such as damage, title etc and additional expenses. Lastly, there are a few additional expenses that may impact how much money you have to put towards your mortgage each month. Expenses like property taxes, homeowner’s insurance and even things like home maintenance should be factored in before making your final decision. These costs are often overlooked but should be considered before settling on the home of your dreams.

Monday, May 14, 2012