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Home Mortgage Preparation :: How Much Mortgage Can I Afford
How Much Mortgage Can I Afford:
How Much Mortgage can I Afford on My Income?
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There is a basic rule to answer the question: “How much mortgage can I afford?” Most would agree it is the amount of monthly budget expense to earmark for housing. That number is 40% of your total monthly income.
What is not set firmly is how much of that is a mortgage payment and how much is left to pay for utilities and maintenance. What you can just barely afford now might turn into an unbearable burden should your circumstances change, so you need to be care when thinking how much mortgage can I afford?
A Couple’s Situation
If a married, working couple budgets what repayment they can afford, they must consider the prospect of one of them being out of work sometime during the loan. How long they would be able to continue to meet their payment requirements would depend on lifestyle changes and the lending institution’s leniency. Then the question truly becomes: How much mortgage can I afford, because only one person is paying for it?
Many people, as shown by the recent housing market unrest, have chosen to finance at the limit of their affordability. The most common way to put oneself in a risky situation with a mortgage is to choose an Adjustable Rate Mortgage while rates are low. The payments will only get larger and many buyers are unprepared for this additional strain on monthly expenses.
Different Loans
Another way to get ahead quickly on the principal owed is to have a 15 year loan as opposed to a 30. While the strategy looks appealing on paper, many have cut deeply into other areas of their finances to meet those higher payments. Even with a higher interest rate, it’s safer to have a lower payment that you know you can make each month.
Take the 30 year mortgage and make the same payments that you had hoped to make on the 15 to be safe in knowing how much mortgage can I afford. The additional principal payments will add up, and you can pay that final payment in almost the same amount of time as the 15 and if things get tight, there’s a lot less stress.
Eventually, your lifestyle will choose ‘how much mortgage can I afford?’, but the lion’s share of buyers will be close to the ‘40% of budget’ number. That will answer the question: How much mortgage can I afford?
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Home-Mortgage-Preparation.com :: How Much Mortgage Can I Afford