How to Determine How Much to Pay for A Mortgage and Sleep at Night

by: Mari Takeshita

People are sometimes uncomfortable with a mortgage payment and they often ask us whether they should get a mortgage for a particular amount.  Here’s the great way to tell if the mortgage payment you’re thinking of getting is too high for you:

Go thru your net income ( take home) and review your bills.  Once you have done that, determine how much you spend on food and other family activities.  Then add in a little for savings and emergencies.  Once you have completed your additions and minuses. You can see what you are really dealing with in your REAL funds.

If there is money left over that makes you think and feel, that is good—then now work to stay on budget.  If there is a negative at the end of that exercise, perhaps you are buying more than what your life style can handle.  You don’t want to be house poor and not have funds to do other things in life. ( LIFE IS SHORT- SO ENJOY)

You may also take the time to re-evaluate your spending.. We live in an immediate gratification society and maybe the things you are spending money on is really “blowing money” rather than being responsible or learning to budget.

Remember, once you sign the last piece of paper at the closing, that mortgage is yours to pay.  There’s no way out of it, other than refinancing the loan, selling the house, or going into foreclosure.

Here are some things that should NOT be part of your home buying thought process:

  • If you think you can refinance out of a mortgage payment in a few years, you may be mistaken.  No one knows where the interest rates are going to be tomorrow, and they certainly don’t know where rates are going to be in a year.  If someone tells you they know where rates are going to be anytime in the future, they are lying to you.  Interest rates for mortgages depend on only one thing: the demand for mortgage bonds.  Unless you know how many bonds foreign governments and the Federal Reserve are going to buy, you are just guessing.  By the way, no one knows.
  • If you think home values will go up and up and up, and you’re going to get rich if you buy a house, you may be mistaken.  Home values went up and up and up for a decade only because the underwriting guidelines were so lenient, practically anyone who wanted a house could buy a house.  Those times are gone and they are not coming back.  The strict underwriting guidelines that are now in effect become federal law next January, and there are many people who will not be able to buy a house.  With a much smaller pool of people who qualify for a mortgage, the demand for houses will be less, and the values will not go up as fast as they did in the past.

Create your life and position yourself to afford to own your own home!!  NOW is a great time to buy a house.  Interest rates are still very low, compared to rates in the past.  Inflation is also very low at the moment, and real estate is a great asset to own when inflation starts to rise.

So think about a mortgage in a rational manner.  If you have any questions about whether a mortgage is a good thing for you or someone you know, give us a call and we’ll be happy to run all the numbers for you.

Mari Takeshita

Your Realtor