I tell all of my Camarillo home buyers that the first step on the road to home ownership is to determine how much mortgage you can afford. Understanding how much you can add each month to your existing expenses can save you time and narrow down your search for that ultimate place called home.
Below are 3 tips that I share with my Camarillo home buyers in determining how much mortgage they can afford:
1- Determine Your Total Monthly Expenses:
In general your monthly mortgage payments, which includes your loan’s principal, interest, taxes and insurance should not exceed 28% -36% of your gross monthly income.
Also, your total monthly expenses such as credit card payments, utilities, car payments plus your mortgage payment should not exceed 41%-45% of your monthly gross income.
2- Downpayment Amount:
Obviously, the more cash you have to put towards your downpayment, the lower your monthly mortgage payments. Another factor to consider is that if you have at least 20% of the purchase price as the downpayment, you may not have to pay for a monthly private mortgage insurance (PMI). Not having the PMI expenses each month will allow you to put more money towards your monthly mortgage payments.
3- Contact a Local Mortgage Lender:
It is crucial that you contact a local mortgage lender to find out your credit score and the various loan programs that are available for your situation. The higher your credit score, the lower the interest rate you may qualify for, which in return allows you to qualify for a larger loan.
Owning a home is the largest financial investment you will probably ever make. Before taking such a large responsibility make sure you examine all of your options and take into consideration your situation. Remember, no one knows your present and future goals better than you.
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