Determining How Much You Can Afford to Pay for Mortgage Insurance
A home is generally considered affordable if the cost of living in it per month does not exceed one-third of your gross monthly income, which is your income before taxes are deducted. Mortgage insurance premiums are one of these monthly housing costs.
The largest and most obvious cost is your monthly mortgage payment. You will also need to pay for homeowner’s insurance. Even if you pay for homeowner’s insurance only several times throughout the year, figure out the cost per month and include it as part of your housing expenses.
You should also count any home maintenance costs as part of your monthly budget reserved for housing. Even though you likely will not need to repair something every month, keep records of maintenance to your home and calculate the average cost per month.
Include utility bills in your monthly housing cost, as well. If you are moving into a new home, you can get an estimate as to how much electricity, heat, water, or other utilities will cost per month.
Once you have calculated your housing costs per month, see how much money is left over before you reach one-third of your monthly income. This should be the limit on what you can spend on mortgage insurance. Determine the type of mortgage insurance payment option that is affordable for you. Monthly mortgage insurance premiums can cost more per month than a single premium plan, but will not accrue any interest. If you cannot afford a monthly premium plan, you may be able to afford a split premium plan, where you can roll some of the cost of mortgage insurance into your loan and pay the rest on a monthly basis.
Your lender will take your monthly housing costs into account
when determining how large of a mortgage you can realistically
repay. This will help ensure that you purchase a home you can
afford and that you will be approved for your loan.
Mortgage Insurance Directory