With the average price of a house in Sonoma County being $640,000 many probably would want one; however, wanting to purchase a house and being able to do it are two different things. The following things should be considered if you want to buy a house successfully…
The most important thing is can you afford the mortgage payment? Is your income rising, remaining stable, or is it going to decrease over the course of the next few years? If your income is going to rise or remain stable that’s a healthy platform.
What other monthly payments do you carry such as car loans, student loans or credit card payments? How will you manage paying those back while carrying a mortgage payment? What percentage of your monthly income will be going towards other monthly obligations? If more of your income is going towards debt than savings that’s an issue. Which means putting off the house purchase, paying off other debt, buying a less expensive house or putting more money down.
Remember, for every dollar of monthly debt it requires $2 of income needed to offset it. For example, a $500 car payment requires $1,000 a month in income to offset it. If you’re looking at taking on a mortgage payment for example and your total monthly payment is $1,800 per month and you don’t have any other debt at all you’ll need $3,600 a month of income to offset $1,800 per month mortgage payment.
How is your credit score? This one can be a double-edged sword for many. Some people who think they have good credit, don’t have good credit and others who think they have poor credit sometimes end up having a good credit score. To get a mortgage with acceptable terms you’re going to need at least a 580-credit score. In some cases, a lower credit scores depends on which mortgage company you hire for home financing.
The number one reason why people don’t get mortgage loans today is debt to income e.g. is taking on too much mortgage payment in relationship to their monthly income. As a by-product, the biggest challenge for buying houses is income to offset the proposed debt and current monthly debt followed by the cash to close.
If you’re looking to buy a house in a safe and prudent way, seek the advice of an experienced mortgage lender who is willing to work with you to make your financial situation work. If your home buying plan is on the longer-term horizon, 10 years or longer and you can afford the mortgage payment above and beyond anything else, it may make sense to purchase a house on a fixed rate mortgage since affordability is number one which would allow you to weather the inevitable financial cycles that occur.
Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.