Buying a home can be exhilarating, exciting, the most incredible thing to do- but it may not always be the best decision. Many people buy a home, thinking their income is sufficient for it, and then end up ‘house poor’ (mortgaging a home but being able to afford little else). Don’t risk your whole financial future without a bit more planning.
Here are some items you should consider to ensure you can afford your mortgage.
This tip is an obvious one, but you need to make sure you’re making enough money. If you’re going to be paying eight hundred a month on your mortgage, you need to be earning at least 2,400 a month. A good rule of thumb is for your house payment to be no more than a third of your monthly income.
Of course, your mortgage will be a big chunk of this, but what other monthly payments are you making? If you have a six hundred dollar car payment, five hundred dollars in credit debt, a three hundred dollar student loan repayment, and an average of five hundred dollars on phone service, internet, and food per month: you could be in trouble.
Although your mortgage is a significant expense, it shouldn’t be the only one you consider. Think about trying a house payment calculator to see if your finances make a house affordable.
Thirty years ago, most jobs turned into careers. In recent times, with people living more mobile lives and job satisfaction at an all-time low, a third of working people change careers at least once a year. You may be able to afford the home now, but do you see yourself in that same job in a year? How about ten years? Heavily consider if your income will be steady and if you can be sure that you’ll keep it.
It’s not wrong to have aspirations to do more in life; you have to take those hopes into account when buying a home. If you want to change work, make sure you have a new job lined up immediately, or at least four months of savings set aside to afford it. You don’t have to stay in the same position forever, but you can make sure any changes you make are informed.
If you haven’t bought a home yet, and you can’t afford it, now would be the time to hold off and pay off some debt, or work to get a higher paying job. If you’ve already bought your home and you can’t afford your mortgage, there are still a couple of options available. A big one would be to rent out bedrooms, or even the whole property itself until you can afford it on your own. Consider contacting who you got the mortgage from, and ask if they’d be willing to extend the payment date to allow lower monthly payments.