True, the bank has pre-qualified or pre-approved you.  Let’s take it a step further now:

  1.  Check with the bank if the monthly mortgage payment includes property tax and the homeowner’s insurance (hazard insurance for typhoon, fire, earthquake).  These obligations are mandatory and payable each year.  If the mortgage payment does not include the property tax and insurance, then you’ll need to make sure that you budget for this each month so that you’ll have the funds ready when it is time to pay.
  2. Let’s take an honest look at whether you really want to borrow at the pre-approved amount.  Does your lifestyle allow you to pay that monthly mortgage payment?  Do you have medical expenses, private school expenses, upcoming auto repair bills, a kid going off to college?  Do you foresee a drop in the family income (will you be retiring before the loan is paid off?)?  Job change?  A new baby?  All these are expenses that fall into the 64 percent mentioned in Part 1.  If any of these expenses change, will you be so stretched that you’ll not be able to make your mortgage payment?


Leave a Reply