Personal Finance Ology

Now that you are working on improving your credit or keeping it in good standing, and you’ve figured out all of the determining factors that will lead you to financially responsible home ownership it’s time to decide on a purchase price that provides a monthly mortgage payment you are comfortable with and will allow for continued financial stability. Remember, the exciting part is finding a home we truly love and investing in it, but the important part is making sure we will be able to sustain our investment without putting a strain on our finances.

When you start the process of purchasing a home, before you ever go out to look at any homes, you should first choose a lender, often times your real estate agent will have a relationship with a trusted lender they can refer you to, and get preapproved for a loan. There are many factors that go into determining this amount, such as interest rates, the amount of your current debt, your credit rating, of course, and your income. It is recommended that you take into consideration this amount, but do note that if the amount of loan you are preapproved for seems too high, you do not have to borrow the full amount. The figure the lender provides you is the MAXIMUM amount you are qualified for this is not the amount you are required to spend.

There are many experts who say to pay anywhere from two and a half to three times your annual salary for a home, but it is smarter to look at the amount of mortgage you can get for the monthly payment you feel most comfortable with. Even though you know the total amount you qualify for that amount may call for a higher monthly payment than you were expecting. So always be sure to ask the lender to break the amount you qualify for into monthly payments.

If you feel uncomfortable in determining the affordability of a monthly mortgage payment on your own, you can always ask your lender to explain to you how much you can afford and why they chose that amount. Don’t just let someone tell you how much you can afford. Ask for an explanation. It is imperative for you to have full control of your finances and if you feel a little uncertain, your lenders are usually willing to explain to you all the details of a mortgage.

Photo by: Mike Boon

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2. Clean Up Your Credit Score (Part 1)
3. The Basics of Interest: Part 1
4. Rent VS. Buying a Home
5. Most Common Types Of Mortgage Loans