A Casual Estimate
You don’t need a high precision calculating machine to establish
that you can’t buy anything for more than you earn. Yes,
the amount you can afford for your home loan largely depends
on how much you earn, your annual gross income. The commonly
used thumb rule is that the price of your new home can be
roughly one and a half times your gross annual income. For
example if you earn $100,000 a year, you can conveniently
purchase a home priced at $150, 000. But as the name says
it is only a thumb rule and an exact calculation of how
much you can afford to pay for your home loan is very important.
Home Loan Calculation
When calculating how much home loan you can afford, the
two major things to be considered are your income and expenses.
All sources of income including wages, dividends, interest
and alimony have to be considered and when calculating monthly.
expenses, include everything-car payment, credit card payments,
alimony payments and any other debt payments that you may
have.
Don’t just decide based only on the rent you pay now. Because
the monthly rent you pay now is not at all an indicator
to estimate your home loan.
Income-Expenses calculation is only one half of the estimate.
The other half of the calculation is the complete financial
information about your home loan. When doing so, you have
to take in to account everything including down payments,
duration of the loan, loan term, interest rate, home owner’s
insurance and property taxes.
Home Loan Calculators
To help you with the actual calculation free calculators
are available on Internet. These special calculators help
you calculate your home loan very accurately. You can find
several of these kinds of home loan calculators from search
engines. Different calculators take in to account different
set of parameters (but mostly they all consider income,
debts and loan information) to estimate the amount of home
loan that you can afford. You can easily find a calculator
that fits your specific needs.
How Can You Enhance Your Ability to Afford a Home
Loan?
Yes, There are ways to help you buy that high priced home
of your dreams. You can afford an expensive home loan, and
here are some tips to help you do that.
• Increase your down payment. This will increase the total
home loan amount that you can afford
• Decrease your monthly debts.
• Increase your gross annual income. May be it is time that
you have a talk with your boss!
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