How to Find Out How Big of a Mortgage You Can Afford

Before you go shopping for a mortgage, you need to know what size mortgage you can afford comfortably. Here is how to find out.

Difficulty: Easy

Instructions

1. Consider how much rent you are paying now. Is this amount comfortable for you and your family?

2. 
    
   Make a list of expenses

   Make a list of your estimated monthly expenses. Compare this to your monthly income. Mortgage companies typically do not like to finance a home whose monthly payment exceeds 30% of your gross monthly income.

3. 
    

   Pull your credit score and call lenders to ask about what interest rates they would give you with your credit score.

4. Evaluate your assets. You will need a down payment to get a mortgage. If you qualify for an FHA loan, your down payment requirements may be as low as 3%.

5. 
    
   Your payment will be more than just the mortgage

   Factor in taxes and homeowners insurance. These costs will be added to your mortgage payment every month. Be sure you are prepared for them.

6. 
    
   you are responsible for fixing plumbing problems

   Restructure your budget to include home maintenance costs. If appliances break, you have plumbing issues, or there is a leak in the roof, you are the one who has to pay to fix it.

7. 
    
   set money aside for emergencies

   Take care not to get a mortgage that is at the very top of your budget. Doing so would leave you with little to no disposable income in the event of an emergency.

Tips & Warnings

• Don't allow numerous lenders to pull your credit when shopping for rates unless you already have the home in mind that you want to buy. Mortgage hard pulls on your credit are free for 30 days, but pulls after that time period will lower your credit score and appear as "inquiries".

Resources

• How to Choose Between an FHA Loan and a Conventional Loan
• How to Do a Quick Credit Clean Up