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Home Buying – What Can You Afford?

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                      Home Buying – What Can You Afford?
Okay, you’ve decided to buy a home and are trying to figure out what you can afford. Before
you go home buying, you need to carefully consider what you can afford as far as a mortgage
payment.

Mortgage Payments

The first step you should take in determining what you can afford is to talk to a mortgage
lender. In fact, the best step you can take is to go through the loan process to the extent
required to get a pre-qualification letter. A pre-qualification letter tells you and a seller how big
of a home loan the lender will give you.

So, once you have the loan in hand, that must be the amount you can afford? The answer is
maybe or maybe not. The prequalification letter is based on a number of factors such as your
earnings and credit. It is not based on a picture of your life, which can lead to problems.

Other Expenses

There is nothing worse than buying a home and straining to make the monthly mortgage
payments. This situation occurs when a homebuyer relies solely on the pre-qualification letter
or their own wishful thinking. You may have purchased your dream home, but don’t let the
payments be a nightmare.

In determining how much you can afford to expend on a home purchase, you must consider
your overall financial situation. Although you may be in a decent financial situation at the
moment, do you have future expenses that will put pressure on your finances? Such situations
might include:

1. Planning to have kids in the next year or so?

2. Are your current children going to college soon?

3. If you own a business, is the financial outlook stable?

4. If you work for a company, are you reasonably sure the company is headed in the right
direction?

5. Do you have any concerns regarding the dreaded downsizing?

6. If you are the sole bread winner, what would happen if you were unable to work for a few
months because of health issues?

These general questions are intended to wake you up to the possibility of over extending
yourself on a mortgage. Every situation is different, so make sure you take a careful look at
your life to make sure you are committing to a loan you can afford now and in the future.




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