Buying a new house is a big, exciting step. But before you jump into home or mortgage shopping, it's important to know how much house you can actually afford.
Having a place to call your own is a dream shared by most people. Although it’s fine to dream big, being practical can help put things in perspective. In reality, no matter how beautiful your house will be, if you can't afford it, it will become a nightmare for you and your family. Ebenezer Mortgage Solutions can help make your dream a reality that you enjoy for years to come.
Rule of Thumb
Most people use the 28/36 rule to know how much house they can afford. This rule states that:
- total housing expenses should not exceed 28% of your gross monthly income; and
- total debt should not exceed 36% of your gross monthly income (debt-to-income ratio).
Lenders commonly use the 28/36 rule to determine if you are able to afford a house. So as long as your total household expenses and debt are lower than these numbers, then you are making a sound decision.
What to Consider
A lender's decision to lend money is usually based on the borrower's income, debt, assets, and liabilities. However, there are additional factors that the borrower has to consider, such as expenses and lifestyle.
Your debt-to-income ratio already shows most of your household's current expenses. But if you have near-future expenses such as buying a new car or sending your child to college, you might have to reconsider your budget.
If you are willing to make some lifestyle changes, such as reducing shopping or opting for more homemade meals, allocating more to your mortgage might not be a problem. But if you think it would be too challenging, then you might want to take a more conservative approach to your homebuying.
Another factor that you should never forget as a homebuyer is the closing cost. Depending on your lender, expect to be paying 2-5% of your home's purchase price upfront.
Work With a Professional
Purchasing a new home
is a big decision to make. So it is wise to work with a professional who knows the ins and outs of home mortgage.
At Ebenezer Mortgage Solutions, our mortgage broker can help you find out how much house you can afford. We can also search for the best mortgage deals
in town and help you determine which one suits your needs.
Not only that, we will assist you in the application process and keep your portfolio up-to-date. This is to make sure that the transaction progresses smoothly until the closing day.
Knowing how much house you can afford can help prevent foreclosure or becoming house poor. Being house poor means that you will not be able to enjoy other things because most of your income will go to mortgage repayment. And if that were to happen, you might start resenting buying your house.
Let Ebenezer Mortgage Solutions help you. Call us today at (813) 284-4027