How much can you afford to borrow for a mortgage?
Buying a home means dealing with large numbers. Impact to your budget may seem to be a stretch, especially in the beginning. The win-win scenario is buying a home that meets your current and future needs, without investing all of your money in your home, leaving you without the financial freedom to travel, save for other life goals and have a cash flow cushion. It is not what you can borrow, it is what you can afford. Your income, credit history, your down payment, and your employment are all factors in how much you could borrow. Depending on circumstances, the amount you could borrow may exceed the amount you can comfortably afford. It pays to borrow cautiously.
Run affordability scenarios. You can get another view of your home-buying budget by running home affordability calculator.
When advising a client about how much they should spend on a home, we take into account a few items, such as your income, monthly debts and the amount of available savings for a down payment. As a home buyer, it is important to have a certain level of comfort in understanding your monthly mortgage payments. While your household income and monthly debts may be relatively stable, your overall savings and how much you wish to spend on your home can vary depending on how much you want allocate for a rainy day or how much you want to set aside for a future expenditure.
A good rule of thumb is to have three months of your housing payments, including your monthly expenses, in reserve. This will give you an additional buffer in case there is some unexpected event.
Call or e-mail to schedule a free consultation with us, so we can help you analyze your needs, and determine a mortgage plan that is right for you. By going through this process before you begin the home search process, you can avoid making the mistake of starting the emotional process before you establish your financial boundaries. We can be reached at 773 202 8311.