Taking into consideration the recent real estate crisis, buyers must be able to take note and not overstretch their finances when buying real estate property. The money one is supposed to spend on a condominium unit is a function of two condo price guidelines:
- How the unit will be used
- How much the buyer can afford
Mortgage financing has restrictions put in place to limit Banks’ risk probability and avoid buyers getting in over their heads. The Mortgage industry has increased the amount of down payments and applied tighter restrictions concerning qualifying for a mortgage; this limits the amount, which buyers will look to get.
There are two condo price guidelines when it comes to what you should spend when buying a condominium:
- The general rule of thumb, one can only spend 30% or less of his/her gross income on housing costs including insurance, mortgage, property tax and condominium fees. Spending less than 30% allows you to improve your living standards.
- Spend no more than 36% of income on total monthly debt payments. This means if you have more non-mortgage debt, the less likely you can afford a mortgage. Multiply total monthly income with 36%, deduct total debt payments and this is the amount that can be spent on housing.
Buyers are to consult qualified real estate attorneys or tax specialists on real estate decisions, especially those who plan to use the property as an income producing investment, since certain expenses are tax deductible.