Planning Your First Mortgage
Date: May 21, 2020
Looking to purchase your first home? There are a number of benefits to owning your first home. However, many will have to obtain a mortgage to do so. You should calculate how much home you could afford. When doing so you should consider your income, your debts and the down payments.
Many banks will require that your monthly costs can’t exceed a percentage of your income, for example 28 percent. That means if you earn $50,000 per year, your total monthly housing costs should not exceed $1166.
If you have recurring debts the total monthly payments on existing debt plus new payments for your mortgage may not be allowed to exceed a certain threshold, for example 41 percent.
You can use a mortgage calculator to help determine how much you should spend on a mortgage. To put it simply, someone that makes $50,000 before taxes should probably target a home that is $250,000 or no more that 5 times their annual salary.
When considering the down payment remember that most lenders prefer a down payment of 20 percent or higher to qualify for a conventional loan. If you don’t have 20 percent there are still loan options you might consider.