When you first begin the mortgage process, your lender will take a look at your financial situation to see how much loan for which you may potentially qualify. However, just because you qualify for a certain loan amount doesn’t necessarily mean that you can afford it. Here are some signs that you are about to sign a mortgage that you can’t really afford.
BORROWING FROM YOURSELF
If you have to borrow from other savings, such as your retirement fund, to cover your down payment or other fees, that’s a sign that you may not be ready to purchase a home. Don’t jeopardize your future at the expense of now.
While there are options that allow for no down payment, you should try and save up a little just to show you can. If you absolutely cannot save for any type of down payment, a mortgage payment may stretch your budget to the max, putting you at risk for financial trouble down the line.
NO EMERGENCY SAVINGS
Houses are expensive. If you’re already stretched to your limit financially, a broken air conditioner or leaky roof could push you over the edge. It should be your goal to have at least three to six months worth of expenses in an emergency savings account that can help cover those unexpected costs.
Your home is the largest purchase you are likely to make in your lifetime, so it’s not uncommon to have feelings of doubt, guilt, or apprehension throughout the process. However, if you can’t shake that feeling, it may be time to reexamine your situation. It can be difficult to admit, especially if you have found what you believe to be your dream home. Nevertheless, it’s important to not get yourself into a difficult financial situation that can impact your life for years to come.