The real estate market has not recovered and is not very favorable for making an investment for buying your dream home. Amidst all the confusion, there are many that are ready to take on the risk. You may come across people with a common query and that is
I want to buy a new house how much can I afford. If you are planning to buy real estate property now, the most important aspect is determining your affordability.
With the number of delinquent accounts on the rise and consequent foreclosures, it is important that you don't allow yourself to reach a point of no return. Your affordability is determined by your monthly income. Your monthly financial obligations are also taken into consideration. So, if you are planning to take out a mortgage, make sure you don’t fall behind on payments.
The best way to find out your affordability and your other monthly mortgage payments is by using a mortgage calculator. There are many websites that allow you to calculate your mortgage payments online for free. Some of the other parameters that can be calculated by making use of mortgage calculators include the following –
• The interest rate regime- FRM or ARM
The interest rate that your mortgage attracts will determine your monthly mortgage payments. If you are opting for adjustable-rate mortgage, you will be required to make lower initial payments. However, in due course the amount you will be shelling out as mortgage payments will rise. This is due to the fact that adjustable-rate mortgage varies depending on the conditions of the market. A little increase in percentage rate can take your monthly mortgage payments quite high. On the other hand, if you are opting for fixed-rate mortgage, your monthly mortgage payments are predictable.
• The loan tenure
The term of your loan will also determine your monthly mortgage payments. If you are opting for 15 years, you will be required to pay less interest rate but higher monthly payments. On the contrary, if you are opting for 30 years loan term, you will be required to pay more interest as you are getting more time to make mortgage payments and the amount you are paying every month is also less.
• APR or Annual Percentage Rate
The total cost of the loan can be ascertained by finding out the Annual Percentage Rate or the APR.
The following factors support buying real estate property in a slow market –
• Lower mortgage rates
• Home prices are low
• Housing starts few
• President Obama's mortgage bailout plan
On the other hand, the factors mentioned below don't create a very positive environment for making investment in real estate.
• The ongoing recession
• The fact that more and more companies are downsizing their labor force makes people vulnerable to unemployment.
• Consumer confidence has received a jolt.
• The Underwater Effect
The time is ripe to wait and watch. The reason is of you are investing in a house; your investment will not be worthwhile unless you spend at least 5 to 10 years in the house.