When you’re in the market for a new home, it’s easy to want the biggest and the best home on the block. However, you want to make sure that your mortgage—especially that monthly payment—doesn’t overextend your budget. When you live beyond your means, you put yourself at risk of getting behind on payments or even bankruptcy.
We at GVC Mortgage want to help you avoid mortgage woes, so here are a few tips to help you determine how much house you can reasonably afford.
1. Have a working budget.
Before you even think about buying a house, we recommend that you have a working budget. Track everything from house payments (either rent or mortgage), insurance, groceries, fuel, car maintenance, eating out, childcare, and so on. Don’t leave anything out. You want to make sure that monthly mortgage payment can easily fit into your budget so you aren’t spending more than what your family is making.
2. Calculate the 28/36 ratio.
Most lenders use the 28/36 ratio to determine your home loan amount. Here’s how it works: Lenders recommend that only 28% of your gross monthly income go toward your mortgage payment. Additionally, if you plan to add other debts into your mortgage, this payment should not exceed 36% of your gross monthly income.
3. Utilize a mortgage calculator.
If the mortgage math is a bit fuzzy, don’t stress out. Instead, use a home loan calculator. By plugging in your data, you can get a better idea of what monthly payments might look like for different mortgage amounts.
4. Meet with a mortgage broker.
Your best bet for really figuring out what you can afford is to meet with one of our Indianapolis mortgage brokers. They can help walk you through the home loan application process so you can get preapproved and know what numbers you have to work with. That way, you’re not guessing as you start house shopping.
To schedule a private consultation and discover your mortgage options, contact GVC Mortgage at (317) 564-4906. GVC Mortgage is based in Carmel, IN and has served the residents of Indianapolis, Westfield, Fishers, Noblesville, and the surrounding areas since 1996. Our mortgage professionals are ready to help you reach your home-ownership goals, so call us today.