A home is your first major purchase, and it is a real commitment, and your mortgage lasts anywhere from 15 to 30 years. People face a lot of changes over such a long time period, but you don’t want these changes to cause you to wonder how you will afford your mortgage payments.
The most important thing to do before you look at homes for sale is to determine what price is affordable now and in 10 years. Here are three ways to make sure that the home you buy is one that you can afford:
Be Honest About Your Finances
If you don’t know your credit score, now is the time to look it up. Your credit score has a big impact on the interest rate of your mortgage, and having good credit can mean paying tens or even hundreds of thousands of dollars less in interest.
Make a Down Payment
Some lenders will not require you to make a down payment. This is tempting for some first time buyers. However, the ability to make a down payment has a huge impact on your loan. Not making a down payment means that you need to pay for private mortgage insurance which can add on a fee of up to 1.5% of the mortgage.
Plan for the Future
Your salary may be stable right now, however, if you intend to make a career change or start your own business in the future, you want to make sure that your mortgage payments are still affordable. The one thing you don’t need during a period of uncertainty is to worry about how you will make your mortgage payments.
Remember that true affordability is not your ability to make the payments now but how these payments will impact your finances in the future.
Private mortgage insurance, or PMI: Just the basics, bankrate.com How to buy a home you can afford, in 9 steps, businessinsider.com