There are so many questions when it comes to buying a home and trying to find the best answers aren't always so clear. Since this is something that I am personally going through now, I would love to share this with all of you too.
I would love to have this be a conversation so I could get your input too. Let's go over some questions and possible answers that I have come up with and maybe it can help you along the way too. If you have any input, feel free to comment on this post.
Have you ever wondered what it takes to buy a house? How much income? How much down payment? How do I select the right loan duration? I have been paying rent for 20 years, how do I know when I'm ready?
The first and the biggest question I have tossed back and forth in my head for the last 20 years. Can I do it? Can I afford to pay a mortgage instead of paying rent?
It's not a simple question. I have been paying rent for over 20 years, can I afford to pay a mortgage instead? What if I can't, what will happen if I hit a hard spot and I can't pay my mortgage. Will I lose everything I have invested?
That is one of those questions that caused so much uncertainty for me. It made me really think hard and debate everything I knew about how I was living. For me, the uncertainty was always my big roadblock. The fear of not being able to do it or afford it made me not try. I wanted to maintain the stability I had already created.
Even though I would never own the property I was renting, I wouldn't lose anything along the way.
So, how do I know if it's something I can do?
I don't have an honest answer for that but, it did. It seemed like it was too much to figure out so I didn't do anything about it at all.
Have you ever wondered what it takes to buy a house? How much income? How much down payment? How do I select the right loan duration? I have been paying rent for 20 years, how do I know when I'm ready?
The first and the biggest question I have tossed back and forth in my head for the last 20 years. Can I do it? Can I afford to pay a mortgage instead of paying rent?
It's not a simple question. I have been paying rent for over 20 years, can I afford to pay a mortgage instead? What if I can't, what will happen if I hit a hard spot and I can't pay my mortgage. Will I lose everything I have invested?
That is one of those questions that caused so much uncertainty for me. It made me really think hard and debate everything I knew about how I was living. For me, the uncertainty was always my big roadblock. The fear of not being able to do it or afford it made me not try. I wanted to maintain the stability I had already created.
Even though I would never own the property I was renting, I wouldn't lose anything along the way.
So, how do I know if it's something I can do?
Okay, finding out it's not as hard as it seems. The hardest question just might have the simplest answer, I had no idea!
Are you ready for the simple answer?
Use a mortgage calculator to find what your minimum requirements are to get a home loan.
This could just as well be the greatest idea ever. Before I found a good mortgage calculator, it was very intimidating thinking about going to a bank to talk to someone about it. What if I didn't make enough money? How embarrassing would that be? I've talked it over with friends and family a million times over the years, I know I am paying more per month in rent that most people pay for a mortgage, surely I could do it.
Are you ready for the simple answer?
Use a mortgage calculator to find what your minimum requirements are to get a home loan.
This could just as well be the greatest idea ever. Before I found a good mortgage calculator, it was very intimidating thinking about going to a bank to talk to someone about it. What if I didn't make enough money? How embarrassing would that be? I've talked it over with friends and family a million times over the years, I know I am paying more per month in rent that most people pay for a mortgage, surely I could do it.
So why the uncertainty?
I don't have an honest answer for that but, it did. It seemed like it was too much to figure out so I didn't do anything about it at all.
Why I like the Minimum Income Requirement Calculator.
This is a simple to use, fill in the blanks calculator. If I want to go back and change the entry I can. I can play with the numbers on my own terms without being asked why or where I got the numbers from.
Maybe it's the extra questions and the fear of having the wrong answer is why I never went into a bank to see if I could do it.
At the top of the calculator, it is very easy to understand. Enter in your specific calculations, without having to enter in your own personal information. It's not an application, it's just a calculator. You don't have to worry about being contacted or harassed by agents before you are ready to commit to the process.
So back to the numbers, if you have found a house you are interested in or if you are just wondering how much you can afford, plug in the amount of the house and how much downpayment you will be using. That will automatically let you know how much loan you will need to take out.
The next section is about your Mortgage Structure. Here you can pick how long you will want to make the loan for. I do recommend going with the longer-term first to see what the payments will look like. If you can afford more, then aim for a lower number of years. You don't want to overextend yourself on monthly payments.
I have always thought it would be better to get the lower payments so I can get a few payments ahead if possible or make principal payments to bring the interest down if possible. Keep in mind, later in life if your situation changes, you can refinance to change around your monthly cost. There is an option for refinancing as well.
The next section is Other Ownership Costs. This is the number of your other home costs. It asks for annual real estate tax, homeowners insurance, and monthly HOA dues. This will all be specific to the home you are buying.
Next Up, Other Debt Info. This is your personal information to calculate what you can afford. It asks for monthly credit card payment amounts, student loan amounts, and other bills. Again, this isn't an application so you don't have to name specific accounts or institutions, actual credit card information, or the school that you went to, it's just the numbers of your debt amount.
Last, Debt To Income Ratio. It is preprogrammed with the 28/36 ratio. If your numbers are different, use them instead.
What is really cool about this is that it adjusts as you go. When you are all done and you hit the CALCULATE button, it pops up with all of the information.
You will be able to see how much annual income you will need to purchase the home with the numbers put in. Hopefully, the cost of the home will be in your budget. If it is not, you can plug in the numbers to just how much you can afford so that you don't overextend yourself.
Since I started writing this post, I have visited three different local real estate websites searching for homes within my budget. I am actually really excited about it. My goal is to be in a new home by Christmas of next year.
I am hoping you were able to check out that calculator to see how much home you can afford.
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