The Finance Blogger


New Home Loan in Toledo Ohio

New Home Loan in Toledo OhioOur latest questions is from a reader in Toledo Ohio who is planning to purchase a new home in Toledo and are wondering if they can afford to make this purchase. They need a new home loan in Toledo Ohio or mortgage to allow them to proceed with their plans. They both have good jobs and make approximately $3000 every two weeks together which is around $72,000 a year. They are hoping to purchase a home that is currently listed for $140,000 and have $15,000 to place as a down payment. They feel they will need a mortgage of $125,000, although this may be reduced if they are able to purchase the home at a reduced price after negotiations.

This is an excellent question and more people should do this kind of planning prior to making the leap into home ownership. There might be less foreclosures and bankruptcies as a result if people took the time to determine if they can afford to make the payments prior to purchasing a home.

New Home Loan in Toledo Ohio – Monthly Payments

Using these numbers and an interest rate of 6% with a 25 year term, the monthly payments would be

  • Payments: $720.19 .
  • Total Amount to be payed: $219,058.36
  • Total amount of interest $94,058.36

The interest rate and the 25 year term are negotiable with the banks and could be lower or higher and affect the monthly payment accordingly. However this calculation provides this couple with a budgetary number for them to use in their planning.

As part of their financial planning, they should also include taxes. Although they did not include an estimate of the taxes with their questions we will assume $200 a month for taxes.  Based on this assumption their monthly payments for principal, interest and taxes is $920 which is only 15% of their monthly income. Most banks will approve mortgages that go up to 25% and some will approve high ratio mortgages that go higher. This couple is well inside the limits that the banks use.

There is also a cushion on the monthly payments should they decide to have a family and their income drops as a result or one of them gets laid off which is possible in this economy.

Plan for Upgrades and Emergencies

Most homes will require maintenance of some sort every year and there are upgrades that also will be completed as money is available. Our recommendation for this couple is to set aside some money for this purpose so that it is available to them when they either need to replace such things as the roof, repave the driveway  or other major maintenance items.

They should also have a 6 month savings plan available to handle emergencies such as sickness that prevents one of them from working or if they should receive a lay off notice. With the purchase of this home, at least from a financial perspective, this couple will be in a good position to deal with the financial issues that they may be faced with.

If you have questions about debt , loans or mortgages, please send us your questions and we will try to answer them for you during the following week. You can write your question in the comment field at the bottom of this post. For more information about mortgages, click here.

 

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