What You Need To Know About Home Loans

You’ve finally found your dream house and are ready to commit but there’s that question of home mortgage affordability. The credit crisis and global recession certainly doesn’t help, Don’t let this thought scare you away just yet. Find out if you can go ahead and buy that house at last.

Consider the following factors and identify any areas requiring improvement so that you too can buy your dream home:

1. Know how much you have and how much you owe. How much income are you receiving at present? Is there a chance that it would increase? What will be your financial situation several years from now?How much money do you owe to creditors? What are your monthly payments? Can you still afford to shell out more money after the bills are paid?

You’ll need a consistent source of income that can cover your mortgage and other expenses. Try to foresee possibilities that you’ll need to factor in: a new child, changes in the job, back-to-school plans and cash-flow five or several years from now. Be prepared to be in it for the long haul.

2. If your debts are well managed, then you can afford a home mortgage. The lender will approve your loan more quickly if he sees that your debt-to-income ratio is well within manageable range.

3. Decide which one you prefer: fixed, or variable. Paying a fixed rate is a more popular choice because it can protect you from surges in interests while paying the lowest rate possible for an agreed period of time may be lighter on your budget, but your mortgage payment can go up later.

5. Be prepared to pay a deposit Typically, it is about 10% of the total price. A house priced at R1 000 000 will require a down payment of R100 000. There are also loans with low or no-deposit requirements, but these mainly target first time buyers and end up costing your more in the long run. Since the credit crisis getting a mortgage without a deposit is virtually impossible.

6. You have enough money saved that’s equivalent to at least three months’ monthly income. This will help cover unexpected expenses that could affect your mortgage payments.

There is no fixed answer on the affordability of a home mortgage. It will all depend upon your income, debt, interest rate and other factors ( some beyond your control).

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