So many callers tell me they were playing with an on-line mortgage calculator and the number they expected doesn’t match the actual payment for the house they want to buy. Let’s fix that by talking about how to approach your home buying decision.
Wouldn’t it be great to have a house payment you don’t have to stress about? Before you even think about buying a home, it seems prudent for you to figure out what that number is for your family. Maybe the new house payment should be the same or less than the rent you’re currently paying, because there’s more month left at the end of your money. Or maybe you’re combining incomes due to your upcoming wedding so you can afford to pay more than you’ve been used to. Take the time to know what you can comfortably afford to spend each month. We can use your number to work backwards into the price range you should be shopping for.
The reason the online calculators hardly ever match real life is because they don’t consider the entire monthly expense of owning a home. At the very least your homeowner’s insurance and your property taxes will be included in the monthly payment. But beyond even that, low-down-payment programs often require monthly payments for mortgage insurance. The amount can vary significantly depending on your loan program. To top it off, there might be homeowners association dues for the area you are considering.
Your mortgage advisor can start with your target monthly payment, combine that with the loan program best suited for you, and back in to the target price for your new home.
This approach is so much more responsible than our telling you “what you qualify for”. Are you aware that in qualifying, we’re using your gross income, before taxes? It’s nowhere near the actual “net” amount you take home every pay period, the amount you actually have to spend. Doing loan pre-approvals this way just sets you up for failure down the road when the payment burden finally gets to you.
Spend some thoughtful time doing a budget before you pick up the phone to prequalify for your home loan, and the answer you get in return will be the best match for your family’s income.
Tammy Engel is your local Mortgage Advisor, and is the only lender in Kern County authorized to display the Lending Integrity Seal of Approval. Contact her at 661/822-REAL with your questions about purchase, refinance, or reverse mortgage.