Home Loan

Are you still renting your place? Mortgage rates are so low nowadays so you should seriously consider buying your own house. Instead of throwing away your money by renting an apartment or condo, why not make an investment for your own place.

You are probably wondering how you can afford a mortgage. So here are some few tips that will help you to determine if you can afford a mortgage and if this is the best option for you.

Do You Have Enough Cash ?

The first thing you should do if you want to buy a house is to determine how much cash you have right now. This includes your money in the bank and other equivalents that you can quickly convert to cash.

You have to understand that when you buy a house, you need to make a down payment for the property. The usually down payment could be between 5 percent and 25 percent. Aside from the down payment, you also need to pay the closing costs. So if you do not have enough cash for these, then it might be too difficult for you to start owning a house.

Identify Your Current Level of Income and Expenses

You have to establish your current income level today. When getting a mortgage, you have to convince the lender that your income will remain the same or increase in the near future.

After this, you have to calculate your total expenses every month. You should make an itemized list of your monthly expenses for food, transportation, clothing, utilities, and other items. Deduct the monthly expenses against your monthly income. If there is nothing left, then your chance of getting a mortgage is slim.

Consider Your Debts

An important part of your planning is to determine how much you owe right now. If you are saddled with credit card debts and have outstanding loans, then the banks could turn down your application for mortgage.

Mortgage lenders and banks have limits on how much you can get for financing. It should be no more than 40 percent of your income. If you already have plenty of debts, then your income may not be able to pay for the monthly mortgage.
These are the factors you have to consider to determine if you can afford a mortgage. It is true that you can not do anything when it comes to your monthly income. However, you can get a second job if you want to increase your income level.

You can also put more money in your savings account to prepare for the down payment. Another positive step is to reduce your monthly spending so you can increase your savings. Then you have to begin paying off your debts so you can get fresh credit.

These steps are necessary if you want to buy your own house. Once you improve your financial status, then you should start looking for a suitable property that you can afford. If you are in a better financial situation, you will be able to purchase your own house without trouble.

Many fixed rate mortgages are charging much higher mortgage fees these days. Lenders are taking no chances with borrowers. They want low-risk mortgage customers who can pay large fees to offset any risk that they will move on or fall into arrears.

What you should do is to consider not taking out a mortgage on a fixed rate. Check out the total cost of deals, including fees, when working out what suits you. Discounted variable rates and tracker deals are looking more tempting than ever. The average two-year variable rate stands at 6.66% - cheaper than fixed rates.

Secondly you could consider what is known as a drop-lock mortgage, which starts out on a variable rate with the option to move into a fixed deal at any time without penalty.

Thirdly, you could fix for a longer period and forget about the credit crunch for a while. If you are going to pay a whopping great fee you can minimize its impact by having your rate secure for five years for example. Average five year fixed rates are currently 6.66%, 0.02% lower than two-year rates.

Finally look for the most competitive mortgage deals and get in there quickly. There are still some great offers around