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How Much Can I Afford Mortgage - Asking Yourself “How Much Can I Afford in a Mortgage?”

What You Need to Look at When Asking “How Much Can I Afford in a Mortgage?”

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if you want to buy a house now is the time to do it. Many people are taking advantage of the buyer’s market and are making the first step towards owning a home. If you are one of them you are probably asking yourself, “How much can I afford in a mortgage?” In order to answer that question you need to do some math.

How Much Can I Afford for a Mortgage?

The first thing you need to look at when asking “How much can I afford for a mortgage?” is your monthly income and expenses. Traditionally lenders have tried telling borrowers that they should spend between twenty-five and thirty percent of their gross income on housing. This is really no longer the case.

When asking yourself “how much can I afford for a mortgage?” you can not just look at your gross income and take twenty-five to thirty-percent of it. Why? Because times have changed and the way we live today does not apply to the guidelines of yesteryear’s mortgage affordability. Exactly what do I mean by this?

Say you gross $4,000 per month. If you were to ask yourself “how much can I afford for a mortgage?” and apply the twenty-five percent rule, you would assume you could afford a mortgage of $1,200 per month. But what if you are inundated with debt? What if you have $1,000 per month in credit card bills? What if your student loans are $500 a month? Your debt will have a significant impact on how much mortgage you can afford.

A Better Way

The better way to do the math when asking “how much mortgage can I afford?” is to first take your net income. Then deduct your monthly expenses, such as credit card debt, car payments and utilities. Then take fifty to sixty-percent of what you have left over each month and that is what you can afford, comfortably, for a mortgage payment.

Can’t Swing It?

So you have asked yourself “how much can I afford for a mortgage payment?” and you do not like the answer? Do not despair. Remember, you can afford more with a larger down payment. If you can not afford the mortgage for the house you want right now, start saving. Put money away each month for a larger down payment. The larger your down payment is, the more home you will be able to afford.

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