The “rule of thumb” when it comes to how much house you can afford is that your mortgage payment shouldn’t exceed 25% of your take-home pay. If you have no other outstanding debt, some folks think it’s perfectly fine for mortgage payments to account for up to 30% of your income. If your mortgage payment aligns well with this rule and you are below the maximum percentage, this unfortunately doesn’t mean that you are safe from making a mortgage mistake. Some mortgage mistakes are unavoidable when a major life event takes place. Whether your spouse got laid off, or one of you decides to stay home when you have children and you’re earning less as a family overall, all of these situations can impact the affordability of your mortgage. So whether you made a mistake with your mortgage from the get-go, or bills have increased and now you’re not able to keep up with payments, it’s not uncommon to become what people refer to as “house poor.” Being house poor is stressful and you may end up resenting that mortgage payment each month.
Additional Ways to Tell if Your Mortgage Became too Expensive:
- Not making ends meet.
- Your mortgage is more than 30% of your income (as mentioned above).
- Your interest rate is higher than others.
- Making a dent in your loan principle is near impossible.
- Your income has grown (and you should now be paying a lower interest rate).
- Credit has improved over the years and you can now refinance for a lower rate.
- Your income has grown (and, again, your rate should be lower).
- Your adjustable rate mortgage changed with rates and made your payment increase.
Some ways to avoid getting into any of these housing traps is to do your research and prepare as best you can before purchasing a home. While many of life’s events are unforeseeable, don’t begin your home ownership journey without fully accepting the costs ahead. Don’t simply let a bank tell you what you can afford. You know your family’s budget better than anyone else, and you know what you can truly afford to pay each month. Banks are in the business of maximizing their earnings, so it’s not uncommon to be given false hope about what you can afford. Banks don’t account for expenses like insurance, utilities, and child care when they estimate your maximum approval amount.
There are many other mortgage mistakes homeowners make, and you certainly aren’t alone. Some people assume two mortgages thinking all will be okay, but they aren’t factoring in all expenses associated with owning two properties. Or, other homeowners simply don’t put a substantial amount down on the house and then end up paying in the long run when they’re hit with private mortgage insurance.
Questions to Ask Yourself When You’re Becoming House Poor:
- How long will this situation last? If the situation is temporary, (like having to pay for daycare until your children come of a certain age), maybe you can push through the rough patch and all will become easier in the foreseeable future.
- What changes and sacrifices can you make? Would it help if you took on a second job for the time-being? Ultimately if you can’t bring your income up enough to make payments and also save, your best interest may be in selling.
- Are you facing foreclosure? Avoid getting to the point of being underwater if at all possible. If you’re late on payments and begin heading down the path to foreclosure, consider speaking to your bank about a short sale.
- Should you sell your home? If conditions are not temporary and you don’t things will get easier in being able to pay your mortgage, you should consider the prospect of selling before you do get behind on payments.
Forget Your Mortgage Mistake by Selling Your House for Cash
If you’re in trouble when it comes to making your mortgage payments, no matter the situation, you may want to consider selling the house and finding an alternate solution that doesn’t leave you strapped for cash each month. Whether you may want to keep the cash from the equity in your home and wait for prices to drop before you buy again, or you want to relocate and buy a home somewhere where it’s more affordable- we can make the transaction as simple as possible. If you’re in trouble with your mortgage, acting fast will help you avoid later repercussions from missed payments etc. So, if you find yourself in this boat, you do have a solution in selling before things reach that boiling point. By selling direct to a cash buyer like us, you can sell in as little as 7 days and you walk away with cash. Even if you’re already underwater, we can still help you. Please don’t hesitate to give us a call and one of our home buying specialists will walk you through ALL of your options (including what a traditional sale would do for you in this scenario).Views: 10