How to Get a Loan You Can Afford

When you want to buy a house, you need to understand how to get a loan you can afford. This can be tricky, but it is vital because you need to make sure that you do not end up in a situation where you can't make your monthly mortgage payments and where your home is foreclosed on. There are several things you should do to make sure you get a loan you can afford.

Getting a Loan You Can Afford

In order to get a loan you can afford:

• Shop around for different lenders. The lower the interest rate, the lower your monthly payment will be and the more you can afford to borrow.
• Make sure you figure out exactly how much you can afford. It can be a good idea to "practice" making the mortgage payments before you have to make them. For example, if the loan you are considering is going to cost you $1000 a month and your rent is only $800 a month, set aside the other $200 and make sure that you can live on what you have left. The extra cash you are setting aside can be used to bolster your home down payment or to set up an emergency fund for repairs you may need to make as a home owner.
• Figure out the ratio of your debt to your house payment. Most lenders have a set number that this ratio must fall below. For example, in many cases your property taxes, insurance, interest and principle payment (PITI) must be below 40 percent of your monthly income.

Getting Help

Before agreeing to a mortgage loan, it is a good idea to consult with an experienced real estate attorney. Your lawyer can review the loan documents to make sure that the loan is affordable for you, both now and into the future, so you can keep your home safe.