Determining your home affordability before buying your dream home is important and perhaps that is why prospective US homeowners have a common query and that is “how much home can I afford?” Undoubtedly this is a crucial matter to deal with and shouldn’t be taken as a child’s play. This is because it is your hard earned cash that you are shelling out and often individuals spend their savings to buy their dream home.
What are the factors that will affect your affordability in the home buying process?
There are various factors that will impact your payments when you take out a home loan in United States. Remember living within your means is the catchword that can make your mortgage worth all the effort, time and money.
How much home can I afford is best understood if we find out how the following factors impact a mortgage in United States.
1. Your income
Your income is taken into account when you apply for a mortgage. The mortgage lender will also assess how stable your employment is.
2. Debt obligations and other expenses
Your debt obligations and expenses are important. The lender will want to know if you are in a position to repay the home loan after fulfilling your current financial obligations.
3. Your occupation
The type of work you are engaged in is taken into account. If you are working part time, your earnings from overtime or part time have to be consistent and regular so that your home loan repayment can be supported.
4. Purpose of taking out the loan
Depending on the purpose of the loan, the amount you can borrow usually changes.
5. Rate of interest and home loan term
The term of the loan is important and so are the rates. If you opt for a shorter term, the amount you have to pay each month will be high and vice versa. The lenders may make certain arrangement wherein the amount you pay when rates escalate remain within a limit.
6. Type and location of property
There are few places where the price of property may fluctuate. Lenders may not be willing to offer a home loan if you are buying property in a place where prices are stagnant. Buying a home, the construction of which is “non-standard” in style and size will affect your query how much home can I afford.
7. The amount you shell out as deposit
Since the amount you shell out as the deposit is linked directly to the LTV or loan-to-value ratio, lenders want to know how much you can spend as deposit. This affects the amount you can borrow.
In order to get accurate results make use of the different mortgage calculators to plan out your finances well in advance so that you don’t have to face financial hardship while you are in the process of paying off your home loan.