Taking on a mortgage is a long-term commitment. You should be confident
that your income level will be stable for the foreseeable future, or at
least three to five years, the minimum amount of time before it would
likely make financial sense to sell or refinance.
You will most likely be tapping your savings to make a down payment.
Keep in mind that mortgage lenders won’t want you to deplete your
savings entirely – they will want you to have cash reserves to cover
unexpected expenses. Reserve requirements vary, depending on the
lender and type of loan, but figure at least two months’ worth of
payments.
Additional Costs
Additional Costs
In calculating how much of a monthly payment you can afford, don’t
forget to figure in other homeownership costs, including homeowner’s
insurance, property taxes and maintenance charges. If your rent
currently covers your utilities, you’ll also have to estimate how much
more a month you will have to pay for gas and electricity.
Your Timeline
Your Timeline
If you can’t be sure that you will be in the house for at least three
to five years, you might want to continue renting. If you have to sell
before then, the house probably won’t have appreciated enough to cover
what you paid out in closing costs and other ownership expenses.