Buying a new home or getting into the housing market is a big financial investment. This is why you need to make sure that you are financially ready to take on a mortgage. There are a few factors that will help you decide and evaluate your financial readiness.
Buying vs renting: Which is better for me?
Even in you think you ready to own a home, buying is not always the right decision. While there are many benefits to being a homeowner (like equity and tax breaks), you should also consider the potential disadvantages. Mortgage lenders in Salt Lake City note that need to take into account the money for a down payment, monthly loan payments, and other necessary fees.
How much loan can (and should) you borrow?
In most cases, lenders consider your debt-to-income (DTI) ratio — meaning, your total debt should not exceed 36% of your monthly income. These include your loan payments, credit card debt, and other loans you have. In deciding how much to borrow, you need to assess how much debt you are comfortable to live with. You can get an affordable home with reasonable payments or a more expensive house with larger monthly payments. It may depend on your income and preference.
How much tax do you get back?
When you choose to buy a home, you will need to allot more of your income towards loan payments than what you usually put down in renting. There is, however, the benefit of tax deduction from owning a house. The breaks available as a homeowner (interest deductions, closing write off) may help reduce your tax bill. This may offset your monthly loan payments, so it may be a good idea learn how ownership will affect your taxes.
These questions can help you decide if you’re ready to take on a mortgage. If you already have an idea on how much you can afford to spend on a home, it is best to talk to a reliable lender to know more about your options.