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Can I Afford a Mortgage?
If you’re getting ready to start house shopping, you’ve probably taken a good look at your budget and wondered how much house you can afford. Maybe you’re asking yourself if you can afford a mortgage at all! There are a few factors to consider when deciding if taking out a mortgage to buy a home is the right step for you.
Rent vs. Mortgage
Depending on the housing market in your area, it may be cheaper to rent the same size home as it is to buy, or vice versa. This varies by area and can even fluctuate over time in the same area. Working with a real estate agent can help you stay knowledgeable about home trends and what is available.
When buying a home, the purchase price isn’t the only thing that you have to consider when deciding what you can afford. The current interest rate can also have a big impact on your monthly mortgage payment. Insurance costs and taxes are also included in your monthly mortgage payment in most cases. Called PITI (principal, interest, taxes, and insurance), this calculation is done at closing but you should have a good idea of what to expect early in the mortgage process.
You will also need some room in your budget to take care of maintenance and repairs. Owning a home often comes with added costs that would be covered by a landlord if you were renting.
Talk to a loan officer to see what you would qualify for but also compare this number against your own budget to decide what is best for you. Keep in mind that you don’t need to buy an expensive house, even if you qualify for it. Spending less can add some room to your budget for fun things like renovations, upgrades, and entertaining in your new home.