What Can I Afford?

When you are choosing a home of your own, you naturally want to get as much house for the money as possible.  The trick is to buy as much as you can reasonably afford without becoming house poor.

There are many financial factors that apply when you consider owning a home, but only a few are significant to a lender:  your employment history, how much of a down payment you plan to make, what your gross income is versus your debts, and your credit history.

But you need to think bigger than a mortgage loan.  You need to think about how you are going to meet your other monthly obligations.  Some include:

• Monthly payment of principal, interest, homeowner’s insurance, and property taxes
• Home operating costs (utilities, landscaping costs, home owners association dues, repairs, home improvement).
• Transportation costs.
• Revolving credit card accounts.
• Other monthly costs (student loans, car payments, electronics, phones, etc.).
• Savings and retirement 401Ks, investment accounts, savings accounts.

These are just the basic monthly costs you will have, and you may have others.  Make a budget that includes more than the minimum payments to these obligations.  Think about the utility costs in a larger home, so you can estimate what you’ll be spending.

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