fbpx
22121 Canyon Crest Dr Mission Viejo, CA 92692 +1 949-632-4347

This is the Number 1 Obstacle Keeping People from Buying a Home

This is the Number 1 obstacle keeping people from buying a home

Forget student loans. Insufficient income is the No. 1 hurdle keeping many people from buying a home.

More than half of the participants in a survey by Bankrate.com cited inadequate income as a barrier to homeownership.

The personal finance site polled 2,668 adults between Jan. 30 and Feb. 1.

In fact, when it comes to buying a home, income shortfalls are an even bigger roadblock than credit card and student debt, Bankrate.com found.

Your monthly income and expenses are major drivers in determining whether you can afford to buy a house. That goes beyond just footing the bill for your mortgage.

“You need to look at what is your list of monthly expenses, including what a lender doesn’t consider when they’re assessing your eligibility for a loan,” said Deborah Kearns, an analyst with Bankrate.com. “You need to take into account all of the other bills.”

jacoblund | Getty Images

Saving up to afford a down payment on a new house is only part of the story.

Spend a month or two monitoring your expenses and determine how much of your monthly income will go toward your mortgage payments, said Kearns.

Cash flow is key to determining whether successful homeownership is within your reach.

Your housing expenses, including principal and interest payments on the mortgage, plus taxes and insurance, generally should account for no more than 28 percent of your gross monthly income.

This is known as the “front-end, debt-to-income ratio,” and it’s a rule of thumb for most lenders.

At the same time, you should be mindful of your “back-end ratio” — or the monthly payment for all of your debt, including student loans, credit cards and your mortgage.

Altogether, servicing these debts generally shouldn’t take up more than 36 percent of your gross monthly income.

In addition to the monthly cost of your mortgage, taxes and homeowner’s insurance, don’t forget your utility bills, said Kearns.

fizkes | Getty Images

The surprise cost of maintenance is the biggest regret new homeowners have, Bankrate.com found.

Get ahead of those costs — which can run the gamut from landscaping to heating and ventilation work — by researching and budgeting for it.

“Do some research here to find out what other maintenance expenses you will be dealing with; there will be one-off stuff and reoccurring expenses,” said Doug Boneparth, a certified financial planner and founder of Bone Fide Wealth in New York.

Homeowners should set aside savings equal to 1 percent of their home’s purchase price every year to help cover the cost of repairs and maintenance, said Kearns.

Though do-it-yourself home repair may seem tempting, don’t assume it’s necessarily the cheaper or easier way out.

Further, if you botch a project because you overestimated your abilities, chances are you’ll have to hire a pro to fix up your mistakes anyway.

“If you don’t have the time to do it, you end up hiring someone,” said Boneparth. “So you should really appreciate and understand how much time you have on your hands.”

[…]  Click here to view original web page at www.cnbc.com

Related articles

4 ways to stop worrying and love your mortgage

4 Ways to Stop Worrying and Love Your Mortgage

Every corner of the personal finance world seems to hammer home the same point: Debt is the wealth killer. Debt is the single greatest threat to your college savings, financial independence, and retirement planning. Except, as it turns out, one kind of debt defies these rules: mortgages. Paying money to […]

Learn More
Should I pay off my car loan before applying for a mortgage?

Should I Pay Off my Car Loan Before Applying for a Mortgage?

The editorial content below is based solely on the objective assessment of our writers and is not driven by advertising dollars. However, we may receive compensation when you click on links to products from our partners. Learn more about our advertising policy. The content on this page is accurate as […]

Learn More
2019 and Your New Goals: How Much Mortgage Can I Get?

2019 and Your New Goals: How Much Mortgage Can I Get?

The first quarter of the year is gradually coming to an end. However, a lot of people are still struggling to own a house. Some have ‘all it takes’ to own a nice home nevertheless, the access to their new home is literally limited by ignorance. Are you ready to […]

Learn More

Leave a Reply

Your email address will not be published.