Budget
HOW MUCH CAN YOU AFFORD?
The first logical step in the quest for home ownership in my opinion, would be to take the time to figure out how much of a monthly payment can you really afford. It is not as simple as just applying a standard formula, because no two people’s spending habits are exactly alike. When you sit down with a lender they are going to figure what is the most that they will lend you based on your income and credit. Yet if you have expensive hobbies or habits, or have other obligations, you may not want to spend 28% of your pretax income on a housing payment!
MAKE A LIST!
Look carefully at your budget, take some time and figure out what you are not willing to do without. To do this I would suggest that you begin by writing a list of all of your expenses, including everything that you buy. Try to be as complete as possible. Include small things like magazines, Starbucks coffee and birthday presents, and bigger things like clothes, vacations and nights on the town. See what’s realistically left monthly for housing. (*Remember when you are doing your budget that there are deductions for mortgage interest and property taxes, so you will have a reduced tax obligation and therefore a little more money in the budget.)
WEIGH YOUR PRIORITIES!
I am suggesting that you work the numbers backward and see what you have really available for a housing payment. Then you can figure out how much house you can comfortably afford. What I am suggesting flies in the face of most lenders and real estate agents who like you to get a little more than you can afford (so you can "grow into it").
When you find out how much you are willing to spend per month you have completed step one. The next step is to figure out what kind of loan to get. There are many different programs which offer different rates and payment options. The basic qualifications for any loan are:
- Your credit score (Yes, there are better interest rates available to people with higher credit scores.)
- The ratio between your income and your debts. Your job history and stability.
- Your assets.
So once you know how much you are comfortable spending per month, it’s time to talk about credit!
RE/MAX of Buckhead
DAN Connolly
404-370-0050
O. 404-233-4633
Fax: 404-370-0377