The Real Cost of Owning a Home

So you know that just because someone will lend you money does not mean that you have to take it, but when house-hunting in today’s market, if you happen to be sitting in the proverbial cat-bird seat – that is, you have a good credit score and a hefty down payment at the ready – it can be difficult to remember that sage advice. When you are looking for a home, the best thing you can do before you even start looking is figure out how much you want to pay per month. Not how much you’re actually legally able to talk a lender into loaning you (with interest), but how much you will feel comfortable and relatively stress-free paying on a monthly basis. You will soon find that what you can spend according to your lender and what you will feel like you are spending may not line up at all.

For starters, most lenders will allow you to spend up to 28 percent of your gross monthly income (GMI) on your mortgage, taxes, and homeowners’ insurance as long as that does not take you over spending 36 percent of your GMI on your total debt. FHA borrowers can use as much as 42 percent of their GMI on housing expenses alone. However, warn financial analysts, 42 percent of your GMI will feel more like 2/3 of your take-home pay, and may feel even bigger if you contribute to a 401K – which you should – at work.

Tracking your monthly budget for a few months – including the things you worry about getting fixed, like cars and hot water heaters – can be a great way to determine what percentage of your GMI you are actually comfortable paying on your home. Lenders will light up right now when they see a qualified borrower, so do not let the sunshine and rainbows blind you to the 30 years worth of ramifications of borrowing too much up front. How did you determine how much you wanted to pay per month on your home?

*GOD Speed*
TLD Investments LLC


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