A brutal affair, particularly if you don't really know what you can afford beforehand, would be house hunting. Know your price range in advance and you can avoid looking at really nice homes you can't afford.
Mortgage - Monthly Payments
The biggest costs associated with owning a home is the mortgage. Unless you are rich, you are committing to apportioning a significant amount of your monthly income to that dream home. Considering the difference between the mortgage payment and what you are currently paying is what you need to do when you are evaluating whether you can afford the mortgage.
Will you be able to pay it now and in a few years if it is a significant step up. Under no condition should you assume you will be making more money in the future. What you are making now is where everything should be based on.
When considering monthly mortgage payments, you also need to factor in the type of mortgage. Interest rates have been at historical lows for some time, but are starting to creep up. If you are taking the plunge on an adjustable mortgage and if the interest rates increase over the next few years, will you be able to make the payments? In coming to a conclusion on this, you should assume the rates going up to the caps indicated in the mortgage for the relevant period of time. Again, you don't want to get stuck in a financial bind because you let your eyes overrule you brains when selecting a home.
Other Expenses
Coming with a few extra costs is the pride of homeownership. When they are gauging affordability, the twin evils of property taxes and homeowner's insurance is what many homeowners fail to take into account. There are expenses associated with each of these necessary items and they can be surprisingly high. Property taxes can be an ugly surprise in some states during the first year of homeownership. Much like taxes, they are collected in a lump sum and can be thousands of dollars. Your finances can become unbelievably strained if you fail to plan for them.
Buying a home is absolutely the best move you can make if you're renting. Just make sure you can meet those payments without losing sleep.
Mortgage - Monthly Payments
The biggest costs associated with owning a home is the mortgage. Unless you are rich, you are committing to apportioning a significant amount of your monthly income to that dream home. Considering the difference between the mortgage payment and what you are currently paying is what you need to do when you are evaluating whether you can afford the mortgage.
Will you be able to pay it now and in a few years if it is a significant step up. Under no condition should you assume you will be making more money in the future. What you are making now is where everything should be based on.
When considering monthly mortgage payments, you also need to factor in the type of mortgage. Interest rates have been at historical lows for some time, but are starting to creep up. If you are taking the plunge on an adjustable mortgage and if the interest rates increase over the next few years, will you be able to make the payments? In coming to a conclusion on this, you should assume the rates going up to the caps indicated in the mortgage for the relevant period of time. Again, you don't want to get stuck in a financial bind because you let your eyes overrule you brains when selecting a home.
Other Expenses
Coming with a few extra costs is the pride of homeownership. When they are gauging affordability, the twin evils of property taxes and homeowner's insurance is what many homeowners fail to take into account. There are expenses associated with each of these necessary items and they can be surprisingly high. Property taxes can be an ugly surprise in some states during the first year of homeownership. Much like taxes, they are collected in a lump sum and can be thousands of dollars. Your finances can become unbelievably strained if you fail to plan for them.
Buying a home is absolutely the best move you can make if you're renting. Just make sure you can meet those payments without losing sleep.
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