"How much should you borrow?" is a question people with adverse
credit wrestle with. The answer is simply as much as you can
afford. This is probably less than what you will qualify to
borrow from a mortgage lender. To determine what you can
afford, factor the mortgage payment and other home costs into
your budget.
Cost Of A Mortgage
Your mortgage payment is not just the loan payment; it also
includes real estate taxes, homeowner's insurance, and private
mortgage insurance premium if you borrow more than 80% of the
home's value. These three items often add several hundred
dollars to your monthly payment.
Cost Of A Home
Unlike renting, you will be responsible for utility payments
for your home. Home utilities are usually higher than an
apartment since you have more area to heat and usually a lawn
to water. You will also need to plan on making unexpected home
repairs. This can include fixing a leaky faucet, replacing
appliances, or remodeling.
Plan A Budget
Before you complete the process for a mortgage loan, plan out
your monthly budget. List out your current expenses for food,
clothing, and other regular bills. Next, decide on an amount to
pay for the home, which include both the mortgage payment and
home repair expenses. Most experts recommend paying no more
than a third of your gross monthly income to home expenses.
One factor to consider is that your mortgage payment will not
go up, but more than likely your income will. So through the
years, your mortgage will take a smaller percent of your
monthly income. However, you don't want to place yourself in
too tight of a financial situation by planning on yearly
raises.
Get A Pre-approved Mortgage
Another way to find how much you can afford is to apply for a
pre-approved mortgage. The mortgage lender will approve you for
a maximum amount, but you can borrow less than this. While you
are going through the mortgage loan process, ask how much the
monthly mortgage payment will be.
Shop Prices
When you do start looking at homes, ask about taxes. This often
overlooked area makes a significant impact on your budget. Also,
expect taxes to increase as the value of your home rises.
About The Author: Carrie Reeder is the owner of
http://www.abcloanguide.com, an informational website about
various types of loans. To view our list of recommended bad
credit mortgage lenders online, visit this page:
http://www.abcloanguide.com/lessthanperfectcredit.shtml
