Can You Afford Your Monthly Mortgage Payments?

Know exactly how much debt you can afford

Can You Afford Your Monthly Mortgage Payments?
November 28, 2016

Buying a house is generally one of the largest purchases any American will make. Getting into such large debt might not be a concern for some, but when things go wrong, it can be a disaster. One of the most important considerations when taking out a new mortgage is evaluating whether you can really afford the repayments.

Before applying for a home loan, you must assess your household finances and establish how much you can afford. Lenders have some complex and hard rules when it comes to assessing people's finances, so preparation is key. Brokers will compare your annual income against costs of typical homeownership, including property taxes and the required home insurance.

Typically, lenders like to see that 25 to 30 percent of an applicant's income can go towards housing costs. There are instances, though, where mortgages may be approved even if up to 40 percent of a borrower's income is going towards home expenses. Overextending the family budget may leave you vulnerable, especially when unexpected financial expenses arise, such as an unforeseen medical bill.

Lenders will, in most cases, also look at your other debts, such as your credit card repayments and auto loan balances. These will also affect how much credit an institution is willing to offer you. When considering whether to apply for a mortgage, you should have your personal finances well prepared and aim not to overreach too much. Otherwise, you might get a nasty surprise when your application is turned down, or even worse, your home loan is approved, but future circumstances mean your family cannot keep up with the monthly mortgage payments.

If you are interested in refinancing your home loan, visit the MoneyTips MortgagePlanner.

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Erin | 11.28.16 @ 18:05
This is a big issue when it comes to buying a house. It seems like it could be very easy to become stretched thin because of wanting the best house, and not thinking of the potential stress because there is not enough left over monthly to make ends meet or enjoy some extras every once in a while.
Brittany | 11.28.16 @ 18:34
This has always honestly been one of my biggest concerns when it comes to buying homes. I know mortgage payments can run pretty high, so, it's kind of discouraging.
Chrisitna | 11.28.16 @ 18:48
I'd much rather live under my means that overextend myself. My ex husband always wanted to keep up with what he thought appearances should be, and wound up destroying my credit to do so. I'm far more content now, with less.
Zanna | 11.28.16 @ 19:40
Don't take as big a mortgage as they think you can afford! Go for smaller payments than you can afford and then pay additional on the principal, so you pay less and finish paying quicker.
Nancy | 11.28.16 @ 22:20
I think a lot of us tend to overextend ourselves especially on our first house. We don't want to start at the beginning and work our way up. I think we all need to remind ourselves we don't always have to have the best of everything. Sometimes it takes awhile to earn it.
Jane | 11.29.16 @ 00:03
We have always made sure that one person could afford to live (including paying the mortgage) if something happens to the other person. This leaves extra money to do upgrades in cash (not a home equity loan).
Crystal | 11.29.16 @ 02:01
We were so careful about making sure our income was in-line with our monthly mortgage payment. And then my now ex-husband got laid off. Thankfully, I was able to refinance and lower our payment. And he got another job rather quickly. Such important info. Great article!
$commenter.renderDisplayableName() | 11.28.20 @ 10:47