When purchasing a home, its location and square footage are important features. However, they aren’t as important as affordability of your home for your budget. Mortgage affordability is the most critical component of the entire home buying process. Educating yourself on important mortgage payment tips can help ensure you are on the right path.
Understand the True Cost of Ownership
Potential buyers should understand the true cost of homeownership. In addition to the actual mortgage payment, there are many transaction costs. Closing fees, property insurance, maintenance and property taxes are just some of the additional expenses that come along with owning a home.
Experts suggest that the total cost of these expenses be no more than 30% of the buyer’s net income. If you exceed this guideline, you could be putting yourself in a difficult situation.
Planning ahead can affect mortgage affordability positively. Start by boosting your credit score to help secure a better interest rate, which means less interest paid over the life of the loan. Aim to pay off personal debts like credit card balances to lower your debt-to-income ratio.
The lower this ratio, the more home you can afford. Save for a hefty down-payment. Lenders recommend around 20%, but the larger the down-payment, the lower your mortgage payments. All of these mortgage payment tips don’t just help with affordability; they also help you stay on target with making your payments with ease.
Choose the Right Mortgage
There is no one-size-fits-all mortgage. There are a number of options to choose from, with fixed and variable rate options being the 2 most popular categories. With a fixed rate, the interest rate remains consistent throughout the life of the loan. However, with a variable rate, the interest rate changes to reflect any fluctuation with the current market rates.
The current trend offers the best guideline for selecting between the two. A market expert can research these trends to help you select a rate option most accommodating of your financial needs and abilities. The more closely you adhere to these mortgage payment tips, the more affordable your home purchase and the more comfortable you will be with making your payments.
If you want to learn more about mortgages, mortgage payments and which type of mortgage could be right for you, download our mortgage whitepaper now!