Finding Affordable Housing: What You Pay For
If you are like most home buyers you probably have a budget that you have to follow. After all, there are not too many people who can afford to buy anything and everything on the market. But even if you have a budget, you may find it difficult to stay on track. Do you know the reason for this? Simply put, a lot of people are not aware of what goes into their monthly payment when they buy a home. They think that the cost of the home is the only thing to consider, but this is far from the truth. If you forget about the other details you will find yourself in a financial bind that you may not be able to get out of.
So what are the factors that go into determining a monthly mortgage? First off, the cost of your home is most important. This is known as the principle. Generally speaking, this is going to make up the largest portion of your monthly mortgage payment.
In addition to the principle, you will also pay interest. This is how the mortgage lender makes their money. The tricky thing about interest is that it is different based on your credit score as well as the type of loan that you are interested in obtaining. As you can imagine, if you have bad credit you will have a hard enough time trying to get a mortgage let alone one with a great interest rate. Additionally, you will usually be able to get a lower rate on a 15 year fixed rate mortgage than one for 30 or 40 years. These are all variables that you will want to consider when hunting for a home that you can afford.
Finally, do not forget about taxes. This is one detail that really sneaks up on people from time to time. Although you do not have to lump taxes in with your mortgage payment, it usually makes things much easier. So remember, even if you can afford the monthly payment, when you add in taxes things are going to change quite a bit.
Overall, there is much more to a mortgage than the cost of the home itself. You also need to consider the interest rate that you are going to be able to obtain as well as taxes. Consider all of these factors when budgeting and shopping for a new home.