This is a big step in a persons life and if you budget correctly you should have no issues. The problem is most people do not do a budget and find themselves constantly worrying about how to pay all the bills.
This means the first step you need to do is set out a budget and know what you can expect.
The one major issue about getting pre-qualified for a mortgage is that we qualify a client based on gross income. As you know, though, after tax dollars are what pays the bills.
Your rent payment can include heat, lights, TV etc but you need to realize that a mortgage payment will only cover off the loan payment and sometimes the property taxes. If your rent only includes the rental unit then the other monthly bills should not change that much. (usually heat/lights will be higher though)
So lets look at owning a home. Your regular monthly payments will include (but not limited too) mortgage payments, possible tax payment if not in your mortgage, heat, lights, water, garbage (again if not included in your local municipality. Other potential costs could be lot rent or condo fees.
Let’s use a 175k mortgage amount. In todays rate market that equates to a monthly payment of around $784 dollars. The property tax on this amount would be in the 2800/year range or roughly $234 per month. This means a total of around $1018/mth before you factor in all your other costs. A heating cost would be in the $250/mth range and water would be around $70/mth. This means a total obligation of around $1338/mth. This amount only puts a roof over your head and provides your family with heat and water.
What about food, other payments (car, credit cards etc), child costs, entertainment, TV, telephone, internet etc. You also have to factor in the upkeep on the home. You now have a lawn to mow, snow to remove, maintenance cost on the home, insurance to name a few. All these costs add up and a lot are not required when you rent.
What you need to do is sit down and honestly look at what you are spending now while you are renting. What are the extra things that you will need to pay for if you own a home. As you know the food, other payments etc are not really going to change but the fact that you now have a home that requires upkeep will add to the monthly budget. Take the time and write down everything you are spending money on. What can you potentially afford to cover off a mortgage, taxes, heat and water. Will it be much more than the rent your are currently paying?
Stick with a monthly amount you can afford and you will be happier for it. Remember your first home will probably not be your last. Also remember that as your mortgage decreases your equity increases. When you sell you can use this equity for a down payment for your new home.
If you are looking to figure out a mortgage payment you can access my online calculator here.
Today’s way of getting a mortgage is not like our parents so ensure you seek out a professional that will work for you. Remember I am not paid a salary or by one specific lender. Bottom line – I am your broker working for YOU.
Eric Gall is the owner of Avanti Mortgages (operating as a mortgage broker for TMG – The Mortgage Group Atlantic). If you are purchasing, refinancing or renewing your mortgage contact Eric or check out his website and apply online. If you are a First Time Homebuyer then get your free report here. If selling/refinancing a home get your free report here to avoid some common mistakes.