WhenHow much mortgage can I afford? the time is right for you to start shopping for a mortgage the best question to ask yourself is “What Mortgage Can I Afford?”  While there is no easy answer to this question there are a few steps you can take to make sure you are getting a mortgage with affordable mortgage payments for your situation.  Personally, I would recommend speaking with a Licensed Mortgage loan officer in your area so you can review the costs and benefits of all types of mortgages available however doing your own research is also valuable.

If you are the type of person whom prefers to do their own research then the first thing is to start with yourself.  What other types of bills do you currently have?  What types of bills will you soon have (example: Car is about to die)?  Will you need to make any major purchases soon (example: house need a new roof)?  Is there a chance my income could be significantly reduced (example: loss of sales commission)?  Taking these factors into consideration you will be better prepared to judge what mortgage is best for you to afford.  The last thing you want is to buy a home with mortgage payments higher than you can afford.  This happens more often that you would care to hear of because people did not take the mentioned questions into consideration prior to buying a home.

Mortgage qualifications these days are based on your Gross Income or total income before taxes.  This is usually the largest number on your pay stub.  What you need to figure is your monthly income.  If you get paid hourly then multiply your hourly wage x the hours worked each week then multiply this number by 52 weeks in a year; Example $10 per hour x 40 hours per week = $400 x 52 weeks in a year = $20,800 annual income.  Since we need your monthly gross income, divide this number by 12; example $20,800 / 12 = $1733.33 for your Qualifying income.  For most mortgage loans, the highest acceptable mortgage payment for your income should be 31% of your gross income which would be $537.33 per month.  This number should include your principle, interest, property taxes and home owners insurance.

Now that you know the most you can afford for your mortgage payment you can use a mortgage calculator to figure out what your mortgage payment would be based on the amount of money you borrow.  The more your borrower the higher your payment will be therefore the more expensive the home, the higher your mortgage payment.   If you have money saved you can always put a larger down payment on a purchase of a home to lower your mortgage payments.  This may be a good option to consider as many mortgage types offer lower interest rates with larger down payments.

The last thing to know to answer, “What Mortgage Can I Afford?” is what type of mortgage is best for your situation.   For many first time home buyers or those with imperfect credit, a FHA mortgage may be your best option.  If you have excellent credit established and a larger down payment then a Conventional Mortgage may have the lowest mortgage payment for your situation.  If you have no money for a down payment then try a no down payment mortgage like a USDA Rural Housing mortgage.

For more information on what mortgage payment you can afford try an Affordable Home Calculator from CNN.com or a New House Calculator from BankRate.com.  To get free professional advice call a mortgage company and ask about your mortgage options.

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