Find an Affordable Mortgage

Debbie Wilson
LoanBiz Columnist

Article Rating , 4 out of 5 based on 1 votes

A hefty mortgage payment can make your house and your lifestyle unaffordable. To prevent your home loan from becoming a financial albatross, consider these mortgage tips: 

Budget for Your Mortgage

Most lenders consider it financially healthy for your house payment (principal, interest, taxes, and insurance) to eat up no more than 28-32% of your monthly gross income. This is called your front-end ratio. Add your car, credit card and other payments to your housing expense, divide that by your monthly gross income, and you come up with what lenders call your "back end" ratio. This shouldn't exceed 36%. Of course, your credit rating affects what lenders will approve--great credit can give you more latitude with your loan amount.

Mortgage Approval Doesn’t Mean You Have to Take the Money

If a lender approves a higher mortgage than you feel comfortable with you don't have to use it all or take that loan. You can lower your payment by choosing a less expensive house, coming up with a bigger down payment, opting for a hybrid ARM with a lower rate, by paying (or asking your seller to pay) points to buy your rate down, or by taking a loan with a prepayment penalty. Be wise about what you really want to spend.

Know Your Mortgage Well

Read all mortgage documents carefully before signing. Ask your lender questions about anything you don't understand. It's your job to make sure you know your loan before you commit to the debt. If you don't get any help from your lender, switch to one you feel comfortable with, or even consider hiring a real estate attorney. Many offer flat up-front fees for their service. Don't get caught uniformed. With a little foresight and some mortgage pre-planning, you too can avoid trouble on the home front.

Federal Housing Administration

About the Author
Debbie Wilson owns and operates a lakeside resort. Her previous experience includes profitability consulting for a national healthcare company. Debbie holds a B.A. in Business Management with a minor in Physical Education.

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