Avoid Paying Too Much For Your Mortgage

September 6, 2018

Consider Your Income

Many banks will require that your monthly costs can't exceed a percentage of your income (for example 28%). That means if you earn $50,000 per year, your total monthly housing costs should not exceed $1166 (28% of your monthly income). Using a mortgage calculator you can use this number to figure out how much you can afford. 

 

Consider Your Debts

In addition to your income, if you have recurring debts, the total monthly payments on existing debt plus new payments for your mortgage may not be allowed to exceed a certain threshold (for example 41%). Using the example above that would mean that if your monthly debt payments are in excess of $541 per month (bringing your total debt of $541 + $1166 = $1708 or 41% in total) 

 

Consider The Down Payment

Most lenders prefer a down payment of 20% or higher to qualify for a conventional loan, but there are loan options where you can put down less. However, you should be aware that with a smaller down payment, you’ll likely be required to pay for mortgage insurance, and your loan application will be subject to greater scrutiny.

 

 

 

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