Want to Be A Home Owner?
Home buyer inspection,home owner financing,home buyer mistakes
Every family would like to have the wherewithal to purchase a house of
its own. In addition to the obvious financial advantages of a house as
an investment, a family’s home is also a symbol of security and safety.
One should realize, though, that despite the solid attractions and advantages
of owning a home, your financial situation may make it inadvisable for
you. A lot of money is involved and you should assess your position to
see if home ownership is a good idea at this particular point in time.
You can evaluate your situation according to three parameters – the housing
ratio, your debt obligation ratio and the down payment percentage required.
Assess these factors in relation to yourself to see whether you can afford
a house right now. Let us examine these different parameters, which are
involved when you are calculating the possibility of buying a house.
Housing Ratio
30% of GMI
‘Housing ratio’ is a term that refers to that part of your GMI or gross
monthly income that will be used for the costs incurred while residing
in the house you plan to buy. Consider various expenses – think about
utilities, insurance, maintenance and repairs. Factor in these expenses
when you are forming a budget – they are important heads of expenditure
that should be taken into account when you want to see if you can afford
to buy a house.
Those in the know in the field of finance say that, give or take a small
amount, this budgeted amount for housing expenses should be 30% of your
gross monthly income. Multiply your GMI by 0.30 in order to arrive at
the figure that is the monthly amount you will have to pay. If this is
a manageable figure, it is a positive factor as far as the affordability
of a house for you and your family is concerned.
Debt Obligation Ratio
Less than 36% of GMI
Your DOR or debt obligation ration refers to the part of your income
that will go towards housing and other expenses, loan or advance repayments,
and credit card payments. Someone knowledgeable about financial matters
would tell you that, all in all, your debt obligation ratio should not
be more than 36% of your gross monthly income. If your DOR is lower than
36% of your GMI, you should be able to afford a house.
Down Payment Percentage
20% of full mortgage
When you buy a house, the down payment you have to give can also be difficult
to manage, if you do not have a fair amount of savings. Some time ago,
you only needed to pay 5% to 10% of the down payment when taking on a
mortgage to buy a house, but now the figure has risen to 20%. If you cannot
raise the entire amount, PMI or private mortgage insurance could be the
answer. When you are going to buy a house, make sure in advance that you
are going to be able to afford the amount of money you will have to pay
twelve times a year.
Think About the Future
While you are deciding whether to buy a house or not, you should think
about the various aspects involved. What do you have planned for the next
few years? Does owning a house fit in with that scenario? Also, you should
make sure that your can afford to pay whatever is required every month
without feeling the pinch. And think about whether renting rather than
buying is a better option for you and your family.
No two people are looking for the same thing, and everyone’s situation
is different from others’. Some people have transferable jobs, so they
live in various places in short periods of time – buying a house may not
make sense here. For someone who knows that he or she is going to be in
the same job in the same place for a while, say for at least ten years,
buying a house makes more sense.
Buy When You Are Ready
There is no rule that says you have to buy a house. If you are more comfortable
renting a house, or you want to wait until you are ready for a property
purchase, there is no reason why you should not. But do make sure you
can afford a house before you make a commitment to do so.
