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Gary S. Williams: Make sure mortgage doesn’t cause financial strain

A mortgage is one element of total household expenses, such as taxes and heating costs, that is likely to increase over time. It’s important to consider increases in household expenses in addition to your mortgage payment.

It’s important to arrive at a monthly mortgage payment that doesn’t cause financial strain. When deciding how much mortgage you can afford, you may want to review guidelines that lenders follow when evaluating mortgage applicants. These criteria apply to traditional private mortgages, and criteria for special situations, such as obtaining a mortgage through the Federal Housing Administration, may differ.

-A combined mortgage payment, insurance and property taxes that do not exceed 28 percent of gross monthly income.

-A total debt-to-income ratio of 36 percent or less.

-A reliable source of income. If you are working, two years or more in your current job is favorable. Lenders may ask you to specify how much of your income comes from ongoing sources, such as wages, as compared with commissions or bonuses.

-A good credit score.

-An appraisal indicating the property is worth what you are paying for it.

If you are not comfortable with payment terms that mortgage lenders have presented, consider whether you may benefit by delaying your purchase and saving toward a bigger down payment.

Long-term planning

It’s important to consider increases in household expenses in addition to your mortgage payment. Your ability to manage a mortgage payment over time may depend, in part, on the stability of your monthly payment. Although an adjustable rate, which typically offers a lower initial payment, may be tempting in the short term, your interest rate and monthly payment are likely to increase over time. An unexpected event such as unemployment could potentially jeopardize your ability to cope with increases. In contrast, a fixed rate is consistent throughout the life of the mortgage, which makes long-term planning easier.

Also, when evaluating your ability to carry a mortgage, consider the importance of pursuing additional financial goals, such as saving for retirement or a college education. A mortgage payment that leaves you with the flexibility to pursue additional goals may be in your long-term best interest.

Gary S. Williams, CFP, CRPC, AIF, is president of Williams Asset Management at 8850 Columbia 100 Parkway, Columbia, Md. He is an investment adviser representative with/and offers securities and advisory services through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 410-740-0220 or This communication is strictly intended for individuals residing in the states of: Arkansas, California, Colorado, Delaware, Florida, Kansas, Massachusetts, Maryland, Maine, Michigan, Missouri, North Carolina, New Jersey, New York, Ohio, Pennsylvania, Utah, Virginia, Wisconsin and West Virginia. No offers may be made or accepted from any resident outside these states due to various state requirements and registration requirements regarding investment products and services.