Mortgages are getting more expensive every year, with property costs skyrocketing, and only around half of the American adults have what’s considered a good credit score. Here’s what you will need to consider when looking at mortgages, and how to be sure you can afford one.
Income
First and foremost, how much do you make every month? Is that stable from month to month? Consider fluctuations, and if you had to call out sick, does your job offer protection from losing money to that? Perhaps you should consider ways that you can generate a second stream of income just to bolster your existing one. Other loans come into the equation, too. If you’re waiting on a substantial amount of money to come in and you’re having to use a Bridging Loan Calculator to work out how much you can loan for the short term – this also needs to be considered. This way, your finances will be in a better state at the end of each month. Investing is probably the most popular way of doing this. You’ll want to research where there is money to be made before placing an investment anywhere. If you’re considering investing in Solarworld Aktie, for example, make sure you check the advice from other savvy investors online to see whether this would be a good choice.
Are there other people with which you’d be sharing your home? A spouse, a roommate, a relative? The portion they’d be paying would be significant, but also how long can you ensure they’d hold their end of the rent. If you’re married, or it’s an older relative who’s retiring in one of your spare rooms, it’s easier to calculate- but with roommates, you have to be more careful. If you’re going to be renting to someone and counting it as part of your income, ensure you have at least one solid backup plan if they bail.
The last thing you need is to be unable to afford your mortgage because your renter left.
Other Bills
This expense is often overlooked but should get heavily considered. What other payments do you have to make every month? Child support, car payments, student debt, credit card debt, and dozens of other things pop up as significant expenses. Don’t forget to factor in your monthly payments and make sure that after all of these, you can still afford to give up a third of your income.
Some of these bills may fall off eventually, and you’ll be able to afford more, but starting your mortgage, you need to make sure you plan for them.
Being house poor, unable to afford much more than what you need to survive, isn’t a fun way to live- and can leave you one paycheck away from going bankrupt.
Time
How long do you want to take to pay off your home? Monthly payments on a ten-year plan are going to be substantially more significant than payments on a thirty-year mortgage. What life changes do you think you’ll go through in that time? If you decide to have a child or open a new business, will you still be able to afford the house throughout the years?
It can seem overwhelming, but unfortunately, you must plan out your life to the best of your abilities to make sure you can always afford the house payments.
All Together
Now’s the time to condense all of this information into one. Consider your credit score, how big of a downpayment you need to make, and consider trying a house payment calculator to make sure you crunch the numbers correctly. If you’re still unsure, after going over everything, consider talking to a professional who can go over your finances with you.
Maybe you can’t afford your dream home, but many buy a starter home that they then sell when they can afford the home they want. Give yourself some wiggle room, and don’t try to budget down every last penny – though keeping some money aside for emergencies, like having to call a local roofing albemarle county company to fix a leak, is probably wise. But, still, what use is a house if you can’t afford to enjoy it?
