If you are like majority of Americans, buying a home is one of the things that tops your list of aspirations.
However, different factors and circumstances often arise, preventing the smooth realization of this goal. These factors and circumstances can range from financial situation to real estate availability, to lack of information suitable and adequate to make a decision. What happens then is that people will generally stick to what they perceive to be the cheaper or safer alternative – to rent or to pay someone else’s mortgage. Before figuring out the ways to improve your financial situation prior to buying a home for the first time, a self-assessment should be made.
This mistake is the willingness to spread oneself too thin. When mortgages are applied for, you must be able to qualify for their payments. Not only will your earning capacity be taken into consideration, but also your ability to pay for the mortgage in addition to necessities like food and transportation, as well as taxes and existing debts.
Two ways may be used in determining these qualifications. The first is by applying the Gross Debt Service (GDS) ratio, which allows only 32% of gross household income to be committed for mortgage payments. Next, another ratio that may be used is the Total Debt Service (TDS) ratio which allows up to 40% of gross household income to be committed to mortgage payments and additional debts, if any. Of course, there are other financing possibilities out there that will enable one to apply for an amount suitable for purchasing a home due to the application of higher ratios; however, these also come with higher rates.
In order to avoid spreading oneself too thin, it is best to apply for a mortgage scheme where you are comfortable with the payments. The peace of mind that comes with this comfort will make the payments easier, not to mention the added satisfaction in paying for a home that you finally own.
PrimeLending offers various loan options to prospective homebuyers anywhere in the US. If none of our available options fits your needs, we can customize your home loan so you can enjoy peace in mind while paying for the home of your dreams. Contact us today!