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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