If you are considering a Mortgage then first you need to be sure that this is the right time for you to bind yourself in a serious financial commitment like a Mortgage. First use a Mortgage Affordability Calculator to determine what you can afford.
The financial institutions to which you will make mortgage applications may approve your loan, but you need to check your mortgage affordability on your own in advance. This will ensure that you will not find it difficult to make regular monthly payments towards your Mortgage once you get the loan.
The Factors that you Should Consider in order to Check your Mortgage Affordability
• Before taking a mortgage loan you should consider your debt situation. If you have high interest credit card debt, personal loans and auto loan then you should try to pay them down before applying for a Mortgage. If you are debt-free then you can easily get a high amount of a mortgage loan.
• You should consider your credit score before applying for a Mortgage. In order to get a good mortgage deal you need to possess a credit score of at least 680. With low credit scores you can avail mortgage under special FHA and VA Mortgage Programs. But if you want to have easy access to Mortgage and want a loan with better rates and terms, then you should aim at credit repair in order to increase your credit score.
• The most important factor of mortgage affordability, on which even the lenders depend, is your debt-to-income ratio. The debt-to-income ratio actually shows how much of your income goes towards paying off your debts. If you want to calculate your debt-to-income ratio, then you have to calculate how much of your total income is spent on making payments towards your current debts such as personal loan, auto loan and credit card debt. A high debt-to-income ratio is considered to be risky. So, the higher debt-to-income ratio you hold, the lower are your chances of being approved of a Mortgage. You may however qualify for home loans for people with bad credit.
• Before applying for a Mortgage you should also consider the current market situation. If you find that home prices are going down, then it will be better to wait for some time. If you are planning to live in the house for long time and your personal financial condition is pretty good then you can consider taking a home mortgage even in a declining market. But, if you are not sure about your home stay and plan to pay off the rest of the Mortgage by selling the house, then you should wait till the home prices start to increase. Otherwise, if you take a mortgage in the declining market, then at the time of selling the home you will find that the home value has become lower than the amount that you owe in form of the mortgage loan.