Buying A Home In Se Florida - What Can You Afford?

Today, with all the foreclosures in the news if you are looking to buy a home for the first time and have chosen SE Florida, you can be excited to know that more than likely you can find a home and move in within a short amount of time. Even though that is good news, do not rush out and try to buy one without learning more about the amount you can afford to spend for your new home.

The banks and lending companies at one time, just about approved anyone walking in the door, this is not the case today. The main reason this is true, is that banks were putting people in homes that could not afford their mortgage payments, thus the reason for foreclosures. When you find a home, you know you would to own, you must first be approved for the loan. Yes, the lending company may be able to approve your loan, but will you happy with the monthly mortgage payment?

Lets say you found a great foreclosure you wish to purchase at an awesome price of $130,000. The lending company informs you that if you have bad credit they can get you approved. You will now fill out all the paperwork, sit back, and wait until you hear from the lending company to learn what your mortgage payment will be each month.

According to the interest rate, you may get a big surprise when you hear from the lending company. We will use 8 percent to give you an idea. At 8% interest, your $130,000 home is now up to $140,400 not including many other fees such as insurance, taxes, etc Your home would now cost $134,680. Remember, the lending company will decide your interest rate by your credit rating. If you do not have an excellent credit score, your interest rate could be as high as 21 percent, which would increase the base amount of the home to $157,300, according to the way in which they add the interest such as compounded monthly. In some cases, if you have bad credit you may not be able to get a loan for 30 years but only for 20 years. Now, your payment can be as high as $2,000 per month due to the interest rate.

The lending company may tell you that you were approved for the loan, but are you going to be happy with this monthly mortgage payment. If you have to pick and choose which other bills you will pay during the month in order to keep up with your mortgage payments, then you may soon learn that the payment is larger than you truly afford.

The best way to ensure you can get a loan with a mortgage payment you are comfortable with is to get pre-qualified for a home loan. Instead of allowing the lending company to decide what you can afford to pay monthly, sit down and make a list of total income for the month. Now, take out all of your payments, including all bills even if they do not come monthly to ensure you have enough money to go around. With this estimate, you can now talk with a lending company and let them know what payment you want the mortgage to be every month and they can give you the price of the home you should be searching for instead of you finding your dream home and then discovering you cannot afford the payments.