Whether you need to take out auto loans or a home mortgage, it’s important to make sure you are borrowing within your means. Creating a financially stable future for yourself and your family is one of the reasons we started DEXSTA Federal Credit Union to begin with. That’s why we created this guide to loans in New Castle (and beyond) that will help you determine how much you should take out when it comes to home and auto loans.
For Loans in New Castle, How Much Should You Take Out?
Thankfully there are a few rules of thumb we can follow when it comes to what amount is sustainable for you and your family. Here they are:
If You’re Purchasing a House
If you are interested in purchasing a home you’ll need to know how much you can afford to borrow. Keep in mind that home loans are generally 5-30 years in length. That means that the larger the loan you take out up front, the more you’ll have to pay monthly until you pay it off. In general, you can afford to take out a mortgage that is 2-2.5 times your annual salary. If you earn $100,000 per year, for example, you can afford a mortgage that is $200,000-$250,000.
However, you’ll want to keep in mind how much property taxes are in your area. These vary by state and can drastically change the amount of money you owe monthly. You’ll also want to consider how much it will cost to heat, cool, and provide electricity, water, trash, and sewer for your home. If you purchase a home that is larger than the one you are currently living in, monthly utility expenses could be larger as well.
If You’re Purchasing a Car
If you are interested in purchasing a car, you’ll need to keep in mind the other monthly expenses you currently have on your plate. In general, your auto payments shouldn’t be more than 20% of your monthly pay. That means if you earn about $2,000 monthly, your car loan (and all other car-related expenses) should be less than $400. However, this is only a guideline and there are certainly times when even that is too much.
Write down all of your monthly expenses including mortgage, rent, utilities, food, savings, and spending money. Keep in mind that your monthly income may fluctuate from month to month and from job to job. Leave yourself a little room to make sure that you can meet all of your needs even if circumstances aren’t ideal. From there you’ll be able to determine how much you have available for purchasing a car and all of the expenses that come along with that.
DEXSTA Federal Credit Union provides home and automobile loans in New Castle and Kent County Delaware, and Cecil County Maryland. We take care to make sure that those who live, work, attend school, volunteer, or worship in our communities receive the loans they need. Stop by one of our branches for more information.