How Much Mortgage Can I Afford?
Posted: under Real Estate.
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Are you interested in buying a home, and wondering “How much mortgage can I afford?”
Ivana Newhouse and her fiancé, Homer Buyer were planning to buy a house. They started looking for a house by driving around looking for “Open House” and “For Sale” signs on houses. They saw several the first day out and they looked at houses at various prices.
They quickly discovered that they would waste a lot of time if they looked at every house on the market. They had to find a way to narrow down the list of prospects and the first thing they needed to do was eliminate those that were too expensive.
But exactly how much is too expensive? How much mortgage could they afford? That is the first question that most first time home buyers struggle with.
They wanted to determine what kind of monthly payment would be affordable and from that they could calculate what purchase price they could afford when buying a home.
Homer and Ivana consulted a loan officer at their bank to find out what loan they would qualify for. The loan office pre-approved them for a loan of up to $480,000.00. He told them that the monthly payment would be about $2500.
When Homer and Ivana purchased their home for $479,000 and then started making their monthly payments, they found that they were running short of cash at the end of each month.
They had considered that their monthly rent had come to practically the same amount as the mortgage payment, so they should be able to afford the payments. What they didn’t take into consideration were the property taxes, insurance, and how much more their utility bills would be as home owners. When they turned on the air conditioning in the summer, their monthly electricity bill came to almost $200 each month.
What do you think they did about this problem?
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Comments (6)
Jun 07 2009
