Everyone has a unique situation, and there are no concrete plans that define how you should do Financial Planning to buy an asset. However, there are some things regarding financial planning that you must keep in mind before applying for a home loan.

How Much Loan Should You Take?

Ideally, taking debt is not the best solution. However, there are times when you don’t have any option except applying for a loan, such as buying home, investing in a small business and more. You must apply for a loan that you can afford to pay back and according to your gross income. According to the experts, your monthly debt payments shouldn’t exceed 36% of your gross monthly income. This is a good point to start, and you can be in a good shape if you clear your debt from time to time.

How much you must save for emergency purpose?

An emergency fund is necessary to cover the expenses in a situation of sudden loss of income or any another financial emergency. According to the experts, a person must save enough of money to do expenses for 3-6 months without any issue. So, if your monthly expenses are approx. $2,500, you must try to save an emergency fund between $7,500 and $15,000.

How much money should you spend on your home?

The thumb rule to calculate the amount of money you should spend on your home is that buy a house that costs not more than two and a half to three times your annual income. For example, if you’re the only earning member in your home and you earn $100,000 per year, you shouldn’t spend more than $250,000-$300,000 on a home.

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