How to afford a mortgage

The main problem in buying a home today is not income or credit requirements but finding having the funds available to cover the down payment and closing costs. While a traditional conventional loan requires a 20 percent down payment the are other options.

For example, funds for the purchase of a home can include a gift from a relative or even retirement funds. There are also many other ways to get a low down payment loan.

You can always have the seller contribute money to pay your closing costs. This is called a seller contribution. Ask your mortgage broker how much of a seller contribution is allowed per the guidelines of the home loan program that you are obtaining a mortgage for. This will help you to afford a mortgage when money is tight.

Another way to afford a home is to use an FHA or VA loan. Many real estate agents may try to steer buyer away from these types of loan because they feel that there is too much paperwork involved with these types of loans. However, with new changes to FHA guidelines these types of mortgages are now much easier to process, especially if you are dealing with an experienced loan officer.

Having a down payment for your mortgage is really a thing of the past. Today there are many 100% financing programs available that will allow you to get into a new home with little to no money out of pocket.

The key to buying a home with the minimum up front funds is to have the seller pay the closing costs. Depending on the loan program you choose, the seller may be able to absorb all of you closing costs.

When having the seller pay your closing costs, the seller will usually increase the price of the home beyond what they are willing to accept. That way it is really the buyer who is paying the closing costs, but is is being included in the purchase price of the home.

If you think that you will be buying a home within the next year, now is the time to start saving. Try putting yourself on a budget, and saving a little bit of money every month. Nobody likes to be on a budget, but if it gets you into a new home then it will be well worth it.

It is possible to borrow your down payment from your retirement account. Usually this interest rate is very good. However, the payment will be figured into your debt-to-income ratio. Also, you can usually only have one loan at a time from your retirement account, so you need to be sure you borrow all that you need the first time. Discuss this option with your mortgage professional.

Deciding how much house you can afford is a personal decision. Many factors come into play. How much can I borrow? How much can I put toward my down payment? What size monthly payment can I afford?

It's up to you to take stock of your income and expenses, both current and projected, to determine what you can comfortably manage each month. Along with your mortgage payment, don't forget related insurance, taxes, homeowner association dues and any other costs rolled into the mortgage payment.

When determining what size monthly payment you can afford, you will want to consider what other monthly expenses you have. Tangible expenses such as car payments, day care and utility bills, all play a role in how large a monthly payment you can afford.

Budget and track what you're spending. Check your credit to determine if there are any errors. Pay down debt. Get to know the housing market and terminology. Also, find out which area you would like to buy in so that you can get a feel and not be rushed in. Talk to a retirement planner about using a 401k plan for a down payment. Make sure it's in your best interest for the long haul. Above all, take your time and understand what you are getting into. Owning a home is a major responsibility that should not be taken lightly.

Another good way to determine if you can afford a mortgage is to determine how much more your housing expenses would be with the new mortgage. Don't forget about utility payments, taxes and insurance.

Once you have determined an amount, put that amount in a savings account every month. This is a good way to see if you can really live with the added expense.

At the end of the six months, you can use the money for a down payment or closing costs. Or set it aside as an emergency fund.

One way how to afford a mortgage is to consult with a mortgage broker. They have a large selection of loans available, many with low monthly payments. Having the right loan product is very important in how affordable your house payments are.

» DISCLAIMER: The information contained in this article on 'How to afford a mortgage' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.