How to Figure Out If You Can Afford to Buy That Much Property

March 29, 2010 - PRLog -- One of the problems of the real estate industry today is that a lot of buyers bought their house and lots that is not within their purchasing capacity. This situation is not healthy for the buyers and the banks or lending companies as well. In order to find out, according to your capacity, how much a bank or other lending firms is willing to loan you, you must first apply for a pre-approved mortgage. The bank will not lend you 100% of the selling price of the property you want to buy; it will at least give you 70% of the price, so determining the price of the home you can afford is really dependent upon your shoulders.

Paying back the bank on the loan you made for the house will require you to pay monthly amortization. In order to find out if you can afford that monthly amortization, you have to manually calculate it on paper or you can use a reliable computer program to do this for you. If you are the type of person who cannot even make both ends meet, if you are having a hard time paying your monthly bills, more so put savings in your bank, then you should not even consider getting a house of your own. It would be foolish to imagine that you can suddenly change your ways and be able to keep up with all your current bills plus your mortgage payment.

Banks allow the lenders sometimes to use 28% to 40% of their net income for the mortgage payment. But you have to take in mind that you still have to pay all your other bills and maintain your spending habit with your net income. If you can manage all of that and still live comfortably, then it is ok for you to get a bank loan. Also, you need to take into consideration additional cost in owning a home that you might not be paying right now as a renter such as water expenses, lawn care, plumbing services and other home maintenance concerns.

You also have to factor in your computation if you plan to change your circumstances in the near future for that will likely affect your budget. Examples of which are if you plan on having more children, if you plan to get married, if you intend to pay for your college expense and if you are nearing the retirement stage. If you compute your budget in a way that stretches it too far, then a little change in your life could greatly affect how you keep up with your mortgage payment each month. Take the bank's pre-approval amount as your gauge and consider the budget you have so you know how much you can actually pay for the home that you desire.

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