Buying a dream home – Few tips on Affordability issues

Owning a house has been a dream in almost all of us. But it’s undoubtedly a big decision in anyone’s life. There are few monetary aspects that matter in taking the big decision.

Lenders are in the queue to finance you with a very low down payment, but the main thing is your financial standing. It is advisable to check Fico score, debt income ratio, down payment capacity, etc. in the initial stage. Since closing cost is not the part of Financed amount of a purchase, people forget to consider it inside the budget. Even in case of VA and conventional loan a product offering 100% but the purchaser has to bear few extra expenses at the initial stage of purchase.

Do you really need to own a house?

Ask yourself the following questions before going to purchase a house:

Do you plan to live in the house for more than 5 years?
Can you afford to take the extra burden or seem better to stay in a rented house?
Is the real estate market in your country in a declining stage?
Analyze your monthly spending and judge your affordability.

Check the Debt to income ratio:

Lenders determine how much loan you can afford by using your debt income ratio. The basic concept is what’s left in your wallet after you incur all your monthly expenses.

Front end ratio: Preferably the applicant’s total mortgage debt and condo fees should be no more than 30% of your gross monthly income.

Back end ratio: Few revolving monthly payments like payment against credit card dues, car and student loans come under this head. Generally lenders don’t include these expenses, but for your own sake, you can take these into account. Here the ratio should be around 36%.

Few other costs:

Apart from monthly mortgage payments, there are some other costs and home purchase and ownership. Since the buyer put a down payment of around 20%, he needs to add mortgage insurance, known as PMI to his monthly payment with an additional closing cost of 3% (approx) of the total loan amount.

Prepare for the unexpected:

I personally suggest keeping aside a percentage of your income for emergency. So don’t completely raid your savings with a home ownership.

Related Resources:

Phoenix Real Estate - Phoenix Real Estate. Search thousands of homes for sale on the Phoenix MLS. Find homes for sale in Phoenix, Glendale, Scottsdale, Goodyear, Litchfield Park, Peoria & Tempe Arizona.

Donald Piro helping buyers and sellers of Chelan county real estate and homes for sale. Also serving Douglas and Okanogan County real estate and all Lake Chelan real estate.

Dothan Alabama real estate company and our commercial office specializes in commercial/industrial, special use, lots and land in the Houston County AL real estate area.

Humber Bay Shore Condos - West Toronto - Humber Bay Shore Condos in west Toronto & Etobicoke Condos, Properties & MLS Listings for Sale - Online Property Evaluations - MLS Search capability - Research MLS Condos for Sale and find help when selling your Condo in West Toronto, Etobicoke & Mississauga, Ontario, Canada.

Property Buyers - The Smarter Choice is UK’s largest Property Buyers with a professional and dedicated team and large cash reserves.