When you buy a house, banks will consider several factors in order to borrow you a home mortgage. Let’s take a good scenario: you have no debt…
In this ideal case, to know how much money bank will give you for your home mortgage loan, take your gross monthly income and multiply it by 33%. The result will tell you if you can afford your payment, your house taxes and other fees.
Let’s take an example. If you have a family income of $7,000 per month, and multiply that amount per 33%, you realize that you have to spend $2,310 monthly for home mortgage and housing.
If you have to pay approximately $200 each month for taxes, another $150 for heating costs, bank concludes that the total amount of your payments will not have to exceed $1,960 ($2,310 – 200 -150).
Thus, with a monthly income of $7,000 and no debt, you could be able to pay $1,960 on your home mortgage. Of course, this calculation has no real value in everyday life: there are other factors that must be considered. Who said getting a home mortgage (and pay it) was easy?
Ultimately, you are the only one who can know what you can afford as risk and financial responsibility. That is the key to stay happy in your life.
If you rent an apartment right now and that situation suits you, do not follow the peer pressure to get a house and a huge loan you will struggle to pay.
It is not because interest rates are low or because others are urging you to get a home mortgage that you have to do that!
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