Homes: Knowing What you Can Afford

By: Adeal Benhayoun

Considering buying a home? If you have ever been in this situation before you likely know that the first question you ask yourself is "What can I afford?" Now, honestly; the best way to buy a home is the "pay it all right now" plan. However, this is not a plan that is widely available. In the real world, the way to go is a mortgage. But, taking out a mortgage is a big commitment that should be planned at every step. A home buyer needs to be ready in more ways then one before making a commitment such as a home mortgage.

Before you start looking for a home ask yourself these questions:

-What is my ability to make a down payment?

-What is my ability to make monthly payments?

-What is my financial future?

-Do I have a contingency plan?

Let's take a look at these questions in turn. First, how much do you have put away in savings for a down payment. Typically the minimum that you will want to go in with is 10%. However, the more you put into a down payment, the more favorable mortgage terms you are likely to receive. This can also directly affect the second question. The higher your down payment is the less you will likely have to pay on monthly mortgage payments. Making a large down payment allows you negotiating room on the mortgage terms.

Your financial future is a big concern when buying a home. One must consider the stability of their earning power before making this kind of commitment. Be sure that when negotiating your mortgage, it is set up in a way that you will be able to make your payments on time. Even in a worst-case-scenario. For this reason you will want to make sure you have a contingency plan. It never hurts to prepare for the unpleasant and unexpected. There are a variety of reasons why one might not be able to make their payments, try to plan ahead for such an occurrence. The likelihood is that this kind of situation won't happen but if it does, you will be glad you planned ahead.

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