Can I REALLY Afford a House?
The first question when deciding to buy a home is: “Do I make enough money?” It’s important to know how much you can afford before going to see a lender. As lenders see you a risk, this could save you some disappointment if you are not prepared.
The application process for buying a home is a serious one. This is a huge purchase with a huge amount of debt- not to be taken lightly. So, you will need to prove that you are capable of handling the mortgage responsibly. The process includes revealing your bank account information, credit history, investments, etc. Be honest and forthright and ask questions if needed.
Here’s what you need to be prepared…
Financial stability is what you want to show them. They do not want you to be a risk. Think of it this way, lending institutions have to give loans to stay in business so it’s imperative that you prove to them that you are a worthy investment for them. If you are low risk you have a better chance of getting a higher loan and decent interest rate. Have the following available:
- Income: Lenders have certain requirements. They need to see that you make enough to not only pay the mortgage, but are able to meet your other financial responsibilities as well.
- Credit Score: This should not be something you don’t know. You should regularly monitor your credit. Similarly to income, the higher your score the greater the loan amount could be and possible a lower interest rate.
- Employment: Do you have a history of long, steady employment? Be prepared to explain any lapses in between jobs or short periods of time at one particular job.
In all actuality, it’s really very simple. If you don’t make enough money on a regular basis or there are too many other expenses, you will be seen as a risk to lenders. You need to gather all your financial information, get organized, and crunch some data. Use the guide below:
Gross Monthly Income
Investments / Dividends:
Total monthly income: $__________
New Home Info
Homeowner’s insurance: per year:
Real estate taxes per year:
Credit card payment:
Total monthly expenses: $______________
Now that you’ve run the numbers you have a better idea of what you’re in for. This will help you be prepared when deciding to purchase a home!