Can Your Finances Afford That Mortgage?

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Mortgage and the availability of cheap monthly installment options can influence people into buying a house they can’t really afford. One of the most important questions you need to ask yourself before purchasing a home is how much you can afford. This is an important thing to consider when buying a house for sale in Brampton.

The best place to start when you want to know just how much home you can afford to buy is mortgage calculators. There are several mortgage calculators available online, including mortgage refinance calculator, mortgage payoff calculator, and BankRate mortgage calculator. Use the basic or BankRate mortgage calculator to help you get started right away.

There obviously is some relation between these two things, as a bank or other lender is unlikely to give you a larger mortgage if you have a very low income or a huge amount of debt. Even so, a bank can try to qualify you for a loan that is a little too big for you to handle.

Take into consideration the amount of money you make each month as a starter, and use only 40% at most of that amount for loan repayments. If you have a monthly income of $5,000, 40% of your income would be $2,000. Deduct other loan repayments to that amount; say you have a total amount of $700 of credit card bills and other loans, then you will have the end amount of $1,300 that you can allocate for paying the mortgage.

Now that you know the amount of monthly payment you can afford, we can continue with calculating the proper house value you can afford to purchase as well. This is where the mortgage calculator came in handy. Use the available calculator to try different combinations until you find the right amount of monthly payment of under $1,300.

Reputable lending institutions employ underwriters to handle their loans. Underwriters evaluate the risk involved with loaning you money. Essentially they tell the lender whether or not it’s a good idea to lend to you. Don’t take it personal, it’s a very exact method to determine the amount of risk involved.

Two institutions, FHLMC (Freddie Mac) and FNMA (Fannie Mae) set the guidelines for most lenders. Lenders sell their loans in secondary mortgage markets to these institutions, who then resell the loans to investors, insurance companies, and banks. Lenders who keep their loans, or “Portfolio Lenders” have more flexible standards, and don’t necessarily comply with Freddie or Fannie’s standards. Don’t stop at just one check out other options and shop around.

These are just some of the key points that you have to consider in buying a house for sale in Brampton. You must take note that your finances is important. You can’t go anywhere shopping for home without considering it.

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