Preparing to buy a Home? How much Home can you afford?

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Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,119
183
63
San Diego, California
www.loansreduced.com
If you're looking to buy a home it's a bit like preparing to go on a very long journey. You want to make sure your finances are in order, know where you're going, how much time and how much money you can afford to spend and what you're hoping to accomplish.

When it comes down to owning real estate, nothing is more important than your financial situation for obvious reasons. You can get locked into a mortgage you can't afford and that result can be devastating. Even if you can afford the mortgage, you might not want to be house rich and cash poor. The best advice I can give is to consider the things that are important to you such as travel, hobbies and your other spending habits. For instance if you like to travel for months at a time it might be wise to consider a smaller house with a lower mortgage payment instead of a large home with a big payment. This could cause you more work and less financial ability to spend on other things you like.

The ratio of your debt-to-income is vital when purchasing a home. The guidelines have become much stricter since the housing crisis. It's very critical to consult with experts about your personal financial situation. Generally speaking, you should have a debt ratio of no more than 37%, meaning all you owe (including your new mortgage, taxes & insurance) should not equal more than 36% of your income. There are still monthly expenses of your home on top of your debt that you want to plan in case of an emergency. What if a pipe bursts, you have a leak in your roof or natural disaster occurs - you want to be prepared for this and have the finances to cover unexpected obligations.

Along with keeping your expenses and debt manageable, a key factor to buying a home is having a healthy down payment. Most lenders and loan officers would consider 20% a good down payment. If you bring in less, you will have to pay for mortgage insurance to insure the loan in case of default. The bottom line is the more you bring in, the less you have to borrow.

Remember, the collapse of the housing market occurred because of the small or no down payment loans. Many of these borrowers just simply didn't understand the risks they were entering into.

You will also want to consider the length of time you want to have the mortgage. If you are a senior citizen you might want to go with a 15 year fixed, if you're young most people decide to go for a 30 year fixed option. The best thing to do is to create a list of your financial matters and the questions you have about buying a home. Once you have that prepared, consult with a highly experienced loan officer (my contact information is below). A knowledgeable loan officer is similar to having a tour guide with you all the time in a foreign country where you don't speak the language. The terminology used in the mortgage industry can be extremely confusing. Having someone to clearly explain what to expect, the time frame, process and clearly explain the documents is priceless.

Know how long you will stay in your new home. This is really important because the cost of buying and selling a home can be very expensive and time consuming. If you’re not planning on staying in your home for more than 6-10 years, you may want to think about renting a property. If you're still deciding on buying, understand the cost of purchasing and maintaining a home. Investigate the economic difference between buying and renting. Look at how often you have moved in the past and whether or not you're ready to settle in for a several years. You can always rent your home out, but this assumes that you'll be a landlord, will take on all those duties and also have to find another place to either rent or buy.

After considering all these factors and determined that you're ready to buy, take the next step. Feel free contact me directly or fill out my online application here: www.loansbyerik.com

Once you have found out what you're qualified for, find the best Real Estate Agent in your area. Your agent will help you further prepare to buy the home of your dreams. Your loan officer also may have a recommendation from who they have worked with in the past.
 
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RoseiB

LoanSafe Member
Sep 7, 2015
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The mortgage you can afford depending on many factors, including your target monthly payment, annual income, and down payment amount and it is wise to have some cash set aside to accommodate any unexpected repairs or financial emergencies.
 

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
2,119
183
63
San Diego, California
www.loansreduced.com
You're absolutely correct and many people try and jump into the process with not having any reserves.