Home Buyer Credit

Find Out Which Housing Loan Fits Your Income

Are you buying a home for the first time? When purchasing a property, most people take out loans to pay for about 80-90% of the bill. After all, why would you want to forego the low price of credit, mortgage interest tax relief and opportunity cost?

However, the size of the loan you take should be based on your income and the state of your finances. Unsure of whether you’re ready to take on the financial responsibilities of a loan? Which one fits your income? Here are some tips to help you find out.

Find Out if You are Ready for a Loan

1. Create a balance sheet.
There’s no easy way around this, so stop whining and get started. Take down your gross monthly income. Then list down your monthly expenses. Be very detailed about this. You want to get as realistic as you can so you can see if you can still shoulder a mortgage.

2. The Ballpark Method
Rule of thumb: you can borrow 2 or 2 1/2 times your yearly gross salary. But make sure you consider the things you’re spending for first.

3. Debt-to-Income Ratio
Know this: most lenders will not finance home buyers whose monthly house payment exceeds 30% of their gross monthly income.

Good luck!