Buying a home is an exciting endeavor, but house hunters shouldn't let their enthusiasm for the process designate how much they spend on a home. There are a number of variables to keep in mind when determining how much you can really afford.
While today’s loan restrictions attempt to prevent foreclosures, which can occur when people buy a home they cannot afford, it is imperative that buyers have a keen sense of their income, current debts and assets when purchasing a home.
Assistance is available from online calculators, and consultation with a mortgage broker is strongly encouraged, but the latter will flesh out the most relevant material - front-end ratios, which characterize a person's income's relationship to direct housing expenses; and back-end ratios, which evaluate income relative to other debts such as vehicle and student loans. Moreover, by working with a mortgage broker to receive a pre-approval letter, you will be assured that all financial assets and burdens have been considered, giving you the confidence you need to search for a home you can truly afford.
Individuals should also remember that mortgage payments aren't the end-all of housing costs. Taxes, utilities, maintenance, unanticipated repairs and homeowner’s insurance are also key parts of the equation.
Homebuyers shouldn’t let the obstacle of coming up with a down payment stop them from buying a home. Down payment assistance is a resource homebuyers can look into if they need help with the up-front costs of buying a home. You may qualify to receive a down payment loan or grant if you meet the eligibility requirements.
Though you will receive objective financial assessments in the home buying process, you alone are responsible for designating your final home buying budget. Stick to your instincts and don’t spend more than you feel you can comfortably afford.