Whether it is your first time financing a home or you’ve done it before; the biggest question that most buyers will have is, “ Can I get a home loan?” It can be an intimidating process but armed with some up front knowledge; it can also be an exciting journey.
There is an endless amount of information online about mortgages. You can easily fall prey to “analysis paralysis.” Information is helpful; but taking the right action with the information is key. My mission is to help you to learn what “right action” to take; to discover your personal target and how to hit it!
Typically the first question you may have is “How much can I get approved for?” The BIGGER question truly is “What can YOU afford?”
It is more important than what the lender may tell you is your maximum loan qualification. Why? Simply because you have to live with that payment every month. There is nothing worse than getting stuck in a mortgage that stretches you so thin in your budget that takes all the joy out of owning a home and instead has you eating beans & weenies; stressing out every month when that payment comes due.
The lender’s loan qualification criteria looks at what percentage the new house payment will be of your monthly income (before tax).
With a good credit score; stable job history and adequate down payment; I have seen loans approved with that percentage as high as 50% or more. Would you be comfortable with a house payment that was 50% of your gross monthly income … not your take home pay? Not me!
The very first step, therefore, in starting the journey of buying a home is that dreaded word “Budget.”
Just the word “budget” slips a little anxiety into the process. In fact, I prefer to do away with the word altogether and call it a “Spending Plan.”
A good start is to write down absolutely everything you spend right now. What’s left at the end of the month? How much of that number are you willing to put toward a house payment?
This exercise is completely different for everyone. It’s very personal. Only you know how you’ll feel giving up the fancy coffee drinks; curtailing dining out or just having less money to do what brings you a few extra pleasures.
So clear your mind of everything else and sharpen your pencil! HEY — “pencil” is kinda old school, right?
I have an awesome FREE worksheet for you that will help you get to the right answer.