What Mortgage Payment Can You Afford?

When it is time for a person to purchase a home many things need to be considered in order for it to be affordable.  The largest expense for an average family is their housing costs.  When you purchase a home it will probably be the largest purchase you will ever make which makes it extremely important to give a lot of thought to what you can afford, and these FHA home financing ideas may help.

Even though you may qualify for a large loan that does not mean that you want to take that amount.  There are factors that mortgage lenders do not consider about your lifestyle and money choices that you need to think about when considering how much you want to pay into your monthly housing payment.  Here are some things you should always consider when taking out a mortgage loan:

•    How much can you really afford?  If you are approved for a $400,000 loan do you really want to purchase a $400,000 home?  Along with that large price tag comes large tax bills, maintenance, and depending on the area you are in, it may take a while for you to sell a high priced home in the case you choose to resell the house.
•    What type of lifestyle do you enjoy?  Many people are house poor because they allowed themselves to get carried away and take a large loan amount that they can barely afford.  Now they better like the home they purchased because they are not going to be going out much because they are spending all their extra money on their home.  If you enjoy eating out, vacationing, shopping, or other luxuries that are costly make sure you consider these expenses when you are budgeting how much you can afford for your monthly mortgage payment.
•    Do you have any expensive hobbies?  If you like to go boating, skiing, sky diving, or any other costly extra curricular activities you should consider these as expenses when you are tabulating how much of a mortgage payment you can afford.  The more pricey the hobbies you have are, the less money you should spend on your home unless you are willing to give them up.
•    How secure is your job, and do you work in a field where jobs are readily available?  If you are not sure about what your employment status will be in the future, you should consider taking out a mortgage that will be affordable even if you have to take a lower paying job.  This will also allow you to save up some rainy day money in case you are unemployed for any period of time.
•    How much do you need to save for the future?  Consider how much a month you would like to put away for savings, retirement, and other long term goals.  Figure your monthly budget without this money when you are considering how much to spend on your mortgage payment.
•    Do you have a large family or expect to start a family?  Children are extremely expensive at all ages.  Once you have children you may want to begin college funds, take out larger amounts on your life insurance policies, or other family related expenses that you may not have right now.  Consider future expenses when you are budgeting for your monthly mortgage payment.
•    Think of any future expenses.  Are you going to get insurance for your mortgage in case something happens to you like death or disability?  Are you planning to get a new car payment soon, and with that how much will your car insurance increase?  You should always keep in mind possible expenses in the future in order to really be prepared for your financial circumstances and know how much home you can afford.

More on FHA Refinancing and Avoiding Foreclosure

Sometimes changes in life could force you to sell your home.  The loss of a job, illness, disability, divorce, or other factors could make it impossible to keep your home.  The FHA has various suggestions for how to sell your home in the case that you need to sell quickly because you can no longer afford you monthly mortgage payment.

These suggestions include:

•    A normal sale.  You can list your home for sale by owner or have a real estate agent sell it for you.  There are fees involved with a real estate agent, but the home could see faster this way.

•    A short sale (also known as a pre-foreclosure sale) is when you sell your home for less than what you owe.  If the real estate market declined in your area or you borrowed so much in equity on your home and now it is worth less that what you owe on it, then your lender may be willing to take less than what you owe.  You must have been trying to sell your home with no offers, be behind on payments and unable to catch up or make current payments, and an appraisal shows that your home is worth less that the loan payoff.

•    You can give back the house to the lender.  The lender may allow you to be clear of your mortgage loan debt if you give up your rights to the home and turn over the deed in full to the lender.

•    Mortgage assumption. This is when a buyer takes over the mortgage and assumes payment.  This buyer will now own the home and you will no longer be responsible for mortgage payments.

All of these are the ways in which the FHA suggests that people who need to sell their home do so in order to avoid foreclosure.  It may be difficult to sell, but if there is no other choice it is better to make arrangements so that foreclosure can be avoided and your credit can be preserved for the future.

Lender Programs to Help You Keep Your Home

If you run into unexpected hardships and are unable to make a mortgage payment, the first thing you should do is to contact your lender.  They want to help you get caught up with your loan payments and have various programs to help.

Some of the ways in which you can make up back mortgage payments include:

•    Forbearance- this is when your lender is willing to let you have a little time off from payments in order to get caught up financially.  This is usually a good option if you lost a job and need time to start working at another place where you will have to wait for your first paycheck while catching up on other bills as well.  Once you get back on track you can make your back payments or make a payment plan to bring your loan current.

•    Payment plan- this is when your lender allows you to pay a little extra each month until the missed payments are paid.  You have to set this up directly with the lender.

•    Reinstatement- this is when you agree to pay back the entire amount that you own at a specific time.  This works well if you are able to make your current payments, and are expecting a lump sum of money in the near future like a commission bonus from work or a large tax return.

•    Insurance- if you have insurance on the loan that covers you in the case of loss of employment, illness, or death, then make a claim.

•    The FHA has a partial claim service.  This allows borrowers to take a one time loan without interest that will repay their missed mortgage payments.  This loan will not have to be repaid for years, and that gives the borrower time to save the money and increase their work wages over time so that they can afford to pay back the loan.

•    Change the terms of the loan.  Sometimes lenders are willing to lower interest rates, or extend the time of the loan in order to give the borrower the extra money they need to afford their monthly payment.

All of these are ways in which a borrower can keep their home, get out of default, avoid foreclosure, and repay their back mortgage payments.  For more information on the FHA and help avoiding foreclosure talk to us.