Buying a home is no easy feat. There’s a lot of paperwork and you need to be on top of your to secure the big ticket purchase. How do determine if you should pull the trigger or wait…

Banks will let you take on a mortgage payment at no bigger than 45% of your monthly income. This means if you’re earning $8k per month your lender will allow you to take on approximately half of this on a monthly basis for a mortgage payment including other monthly liabilities. The reality is 45% of your monthly income is a huge percentage of your income going towards a housing payment and other monthly obligations not considering childcare, college savings, savings in general, other household bills and retirement planning. Simply put, buying a home can be expensive.

Following are some ways to keep your mortgage payment as manageable as possible:

Pay off debt to qualify–if you have a workable down payment, but you have consumer payments such as a car loan for example cherry pick the debts that have the biggest balance with the highest monthly payments, pay those off in full first. Doing so will allow you to not only buy more house, but more importantly, will allow you to afford a new mortgage payment.

Keep your debts in check– car payments, credit card payments, whatever the payments you are currently making will work against your ability to borrow. They limit buying power. These debts should be as absolutely low as possible.

Don’t focus on highest interest debts first–It’s not what you pay, it’s what you owe (minimum payment) that counts. The minimum payment that you’re obligated to make on credit obligations independent of whatever interest rate you have is what lenders will look at to qualify you. Yes that 0% auto loan could adversely affect your ability to borrow especially if that payment is a few hundred dollars per month.

Every $500 rule– for every $500 payment you have that equals approximately 100k in buying power. This goes along way when you are trying to buy a home in a competitive market.

Just because you might get a qualified for a mortgage does not automatically mean you should pull the trigger. The ideal approach is to purchase a house in the following way: make the mortgage payment is low enough so you can pay off other obligations, have the ability to save and contribute to retirement. If buying a home prevents you from being able to save or prevents you from getting out of higher interest rate debt such as credit cards, student loans, personal loans etc. put the housing project on hold or pause and ask yourself “Is buying a house really the best financial move for me?” In some cases buying a house despite the obligations might still make financial sense, in other cases it might make sense to just say “no”.

Remember only you are making your mortgage payment. No other party is making your mortgage payment. Buy a home when it financially makes sense for you to do. Low rates are an attractive reason to buy a home, but exercising financial prudence should be your number one objective in buying a home.

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