For the first time homebuyer, confusion and feelings of anxiety can be quite normal. However, to relieve some of that stress, all you need to do is evaluate your current financial situation to help you to figure out whether or not you can actually afford to buy a house. The following are several factors that will assist you in your decision making process.
First and foremost, you have to look at your personal finances. A first time homebuyer, too many credit card payments or high automobile payments could make life difficult when you add a house payment to the mix. Be sure that your personal finances and your current expenses are under control before you apply for a home loan as the higher your debt-to-income ratio is the less likely you would be approved for a mortgage.
Any lender that you go to is going to take a good look at your credit score before they approve you for a loan. The credit score is a direct reflection of how you handle your finances. Before you apply for a home loan, do what you can to improve your credit score. The better it is the lower the interest rate you would be offered.
Lastly, before you figure out whether you can afford a home, take a good look at your savings. Most lenders require that you put down between 5 and 20% on a home. Will this amount wipe out your savings? If it does, how soon will you be able put the amount back in your savings? Will you still be able to do this if you have a large mortgage payment?
As a first time homebuyer, you may be adamant that you can afford to buy a house. The lender may actually approve you for a home loan and tell you how much you are qualified to borrow. The most important thing every new homebuyer can do is not borrow the full amount they are allowed. While it may look good on paper, making the actual payments may be tough. Always consider how much you think you can afford above everything else.
