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Mortgage Basics

Mortgages come in all shapes and sizes, but they all lead to the same thing: the money you need to buy the property you want. You may be buying your first home or selling your existing one. Maybe it's a second home or an investment property. Whatever type of property you want, we can help get you the best mortgage.

We Make it Simple and Totally Understandable

Community First helps translate all the terms and jargon that can confuse and confound. We answer your questions and structure a customized mortgage plan. Then you apply when you're ready.

How much debt is okay?

Some argue that any debt is too much. Others say that you should have only good debt (for investing) and no bad debt (for spending). In reality though, debt is simply a financial tool that you should use wisely to avoid getting in over your head.

There are several measures you can use to determine whether you're carrying too much debt. One we rely on is known as the total debt service (TDS) ratio. As a general guideline, no more than 40% of your monthly gross (before deduction/taxes) income should go toward mortgage loan payments and other monthly debt obligations.

Realistically, the amount of credit you can afford depends on your personal situation. If your current employment is not secure, you will probably want to take on less credit than the recommended guidelines. On the other hand, if you have no other obligations, such as a mortgage, and your source of income is reliable, you may want to take on more credit, depending on your goals.

The right credit level for You

In any case, you should borrow only enough money to make the purchase you have planned, rather than borrow as much as you can get:

  • Decide on your short- and long-term financial goals
  • Calculate your average monthly income and expenses (including all the bills and debt you're currently paying)
  • Establish a saving and spending plan

The right amount to borrow

To find out whether you can afford to repay a loan, take the difference between your income and your expenses. This is your discretionary income. From this amount, you'll need to first deduct your minimum monthly savings. It's a good idea to also deduct additional savings to help you meet some of your financial goals. These might include buying a house or a new car or building an emergency fund.

What's left over defines how much new credit you can afford to take on. If you're only just meeting your monthly bills, an unexpected expense could mean a serious financial setback.

If you are already paying off debt, which should be included in your expense summary, you may not be in a position to use additional credit until your existing obligations are repaid.

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