The Economy's Influence on Determining Your Mortgage Amount
Posted August 03, 2014


The current economy and the possibility of future changes should be part of the homebuyer’s determination of how much they can afford in a home mortgage. The following should be taken into consideration when deciding the mortgage amount.

• Although standards for mortgage qualification are tight, lenders will make available to the borrower the maximum amount qualified for. This amount is not necessarily what the homeowner should borrow or spend.

• Even though borrowers may be a two-income household, it’s not advisable to use the total amount of both incomes to determine how much mortgage they can afford. The possibility of negative financial occurrences in the future should be taken into consideration. Calculate the mortgage amount based on approximately 25% less than the current combined income to allow flexibility if needed, along with peace of mind.

• There was a time in the distant past in which employee pay raises kept up with inflation. Today, homeowners can’t depend on significant or timely raises in pay in order to make their mortgage payment easier to handle. For this reason, a realistic budget should be set based on their present financial situation.

• Thirty or so years ago, more employees had their retirement covered by a pension and Social Security had a more reliable future forecast. Today retirement is more likely to be funded through a 401(k) or IRA accounts. These can be a combination of personal and employer contributions, if the employee has either at all. Thought should be given to the retirement years and how the mortgage will be taken care of (if still payable), however far into the future they may seem.

Posted By: Michelle Keaton-Barrow
August 03, 2014 09:44 PM




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