There are important factors you should be aware of when deciding what your ideal payment should be.
Personal Considerations for Homebuyers
A lender could tell you that you can afford a considerable estate, but can you? Remember, the lender’s criteria look primarily at your gross pay and other debts. The problem with using gross income is simple: You are factoring in as much as 30% of your paycheck—but what about taxes, FICA deductions, and health insurance premiums? Even if you get a refund on your tax return, that doesn’t help you now—and how much will you get back?
That’s why some financial experts feel it’s more realistic to think in terms of your net income (aka take-home pay) and that you shouldn’t use any more than 25% of your net income on your mortgage payment. Otherwise, while you might be able to pay the mortgage monthly, you could end up “Loft poor.”
Here are the personal income factors you should consider when you start shopping for your new loft.
1. Income
Are you relying on two people’s jobs to pay the bills? Is your current position stable? Can you easily find another position that pays the same, or better, wages if you lose your current job? If meeting your monthly budget depends on every dime you earn, even a small reduction can be a disaster.
2. Expenses
The calculation of your back-end ratio will include most of your current debt expenses, but you should consider future costs like college for your kids (if you have them) or your hobbies when you retire.
3. Lifestyle
Are you willing to change your lifestyle to get the house you want? What is your PBJ for lunch threshold? If fewer trips to the coffee shop and a little tightening of the budget don’t bother you, applying a higher back-end ratio might work out fine. If you can’t make any adjustments or already have multiple credit card account balances—you might want to play it safe and take a more conservative approach in your house hunting.
What mortgage concerns do you have? Leave a comment here.
4. Personality
Even twins don’t share the same personality, regardless of their income. Some people can sleep soundly at night knowing that they owe $5,000 per month for the next 30 years, while others fret over a payment half that size. The prospect of refinancing the house to afford payments on a new car would drive some people crazy while not worrying others at all. You need to find out what fits your dreams.
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Copyright © This free information provided courtesy L.A. Loft Blog with the information provided by Corey Chambers, Realty Source Inc, DRE 01889449; MPR Funding Inc NMLS 2000513. We are not associated with the seller, homeowner’s association, or developer. For more information, contact 213-880-9910 or visit LALoftBlog.com, Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Properties are subject to prior sale or rental. This is not a solicitation if the buyer or seller is already under contract with another broker.
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