If you’ve made your decision and you want to take the necessary steps towards homeownership, the first question that crosses your mind will be: how to find out what type of house you can afford. Fortunately, you have come where you need to be. Keep on reading to find out our tips on the topic!
Analyze Your Income
A decent starting point that will aid you to find out what type of house you can afford is carefully evaluating your annual income. Many financial experts assume that borrowers shouldn’t spend more than 30 percent of their gross income on a mortgage.
For instance, in the event in which your annual income is $60,000, your annual repayments shouldn’t exceed $18,000. If you do otherwise, you may cope with mortgage stress.
Extra tip: When you apply for house financing, having a decent employment record and a history of savings can mean a lot. Also, ensure that any outstanding bills are paid since that may harm your credit rating.
Assessing Your Expenses
When juggling with mortgage payments, it is highly recommended to factor in your costs, to find out what type of house you can afford.
In other words, if your expenses, combined with your mortgage won’t leave you with a tad of wiggle room in the case of unexpected scenarios, perhaps you should consider borrowing a smaller sum. Assessing your routine expenses will aid you to craft a realistic budget. If possible, aim at decreasing your debt before applying for a loan.
Factor in Mortgage Duty and Stamp Duty
Stamp duty is a government task that comes with house purchasing. Bear in mind that it isn’t negotiable, which means that you should factor it in. The amount of money you pay in stamp duty is affected by a myriad of factors: your state and your eligibility for government grants. As for the sum, you’ll have to pay on mortgage duty, it varies by the amount you borrow.
How Much Deposit Can You Afford Paying?
Presumably, the deposit you’ll manage to put aside is the most significant consideration you shouldn’t undermine. Generally, the deposit should be at least 10 percent of the asking price of the house. Before going for it, you should make sure you have this sum.
Obviously, the more expensive the house you choose, the bigger the deposit should be. So you must carefully think this through. Although it is possible to take on a loan with a deposit of 5 percent, it’s still recommended to aim higher than that in the case in which the house may require unexpected repairs, for example.
Factor in Current Interest Rates
Being acquainted with the market’s average interest rate is the decent thing to do if your priority is getting an attractive deal on your home loan. By knowing what the market offers at the moment, you can be confident that you’re making the best decision for your financial security.
And lastly, we would recommend you to use an online mortgage calculator that provides you with a balanced outlook on what type of house you can afford.
We hope that our tips on how to find out what type of house you can afford are, indeed, helpful. Until next time!