Can I afford to buy a home?
Can I afford to buy a home? - Can I afford to buy a home? There are many different factors that go into deciding if you can afford to purchase a home. The most important factors are what is my present income and how much do I have saved. Borrowers can qualify for many different loan purchase programs however they must decide if they can afford it.

As far as most banks loan qualification guidelines are concerned, home owners should have debt payments, including mortgage and other necessary housing expenses, of no more than approximately 45% of gross income. However, since poeple have different spending habits, homeowners should decide for themselves how much of a mortgage can they afford.

A good rule of thumb is to keep your mortgage payment approximately the same as your current rent payment. If you have been able to pay a rent payment every month, then you should be able to afford a mortgage payment of the same amount.

Regardless of where you live, how much you earn or what type of house you are shopping for, as soon as you find out how much the seller is asking, your first reaction might be something like, “Wow! That's expensive!” Your initial assessment is correct. With prices rising quickly, particularly in areas like New York and Boston, even starter homes can carry hefty six-figure price tags. Your next reaction is likely to be, “Can I afford that?”


Generally speaking, most prospective homeowners can afford to mortgage a property that costs between 2 and 2.5 times their gross income. Under this formula, a person earning $100,000 per year can afford to mortgage between $200,000 and $250,000. But this calculation is only a general guideline.

Ultimately, when deciding on a property, you need to consider a few more factors. First, it's a good idea to have an understanding of what your lender thinks you can afford - to gain a precise idea of what size of mortgage their clients can handle, lenders use formulas that are much more complex and thorough. Secondly, you need to determine some personal criteria by evaluating not only your finances but also your preferences.

Many brokers are able to perform a rent vs. buy analysis that will not only compare your monthly payments, but also the potential tax savings, the appreciation of the home, and other factors you may not have considered. In many cases it is actually cheaper in the long run to purchase a home than to continue renting.

When considering to buy a home and figuring out how much you can afford, it is a good idea to sit down with your spouse and calculate your total monthly expenses. This should include all of your monthly bills such as car payment, credit card payments, cell phones payment, personal loans, cable/satellite television bills, etc... This way you can calculate how much you can comfortably afford to spend on a monthly mortgage payment and not fall into the trap of buying a home that is out of your price/payment range. Many homeowners and potential homeowners can qualify for homes and monthly payments that are much, much more expensive than what they can comfortably afford, while living the same lifestyle that they are used to. Please remember just because you can qualify for a $400,000 home does not mean you have to buy a $400,000. Buy a home because it meets your needs and most importantly it is within your budget comfortably. Allowing your home to own you instead of you owning your home has been an increasing trend over the past few years with the availability of all of the new mortgage programs and competitive underwriting programs available out there.

Can you afford to continue renting? Home ownership is the most popular investment tool. With a mortgage you gain equity be paying down principle as well as through property appreciation. You can also use the interest paid on your mortgage as a tax deduction. To determine if you can afford a home you need the experience and expertise of both a good loan officer and a good real estate agent. Together they will help you determine how much you can afford and if there are homes in your area that meet your preference and price range.

When someone asks "can I afford to buy a home?", he or she is often thinking of the short term of 1 or 2 years.
Instead, try thinking of the long term.
In many parts of the country, over a period of several years, homes increase in value by at least 5% a year. So, home owners have an asset that is growing.
At the same time, if their mortgage has a fixed rate, their housing expenses are staying relatively constant, unlike renters, who are seeing an increase in housing expenses generally of 3% to 5% a year.
So, in the long term, home owners have less money going out and an asset increasing in value.

Investing in a home is still one of the safest places to invest your money. Real estate will almost always appreciate and give a good return on the initial investment.

Why should you pay for someone else's mortgage? In a sense that is what you are doing when you are renting. Contact your mortgage professinal to see what price range of home is right for you and let your money work for you and not your landloards,

I want to buy a home. Where do I start? - Many first-time home buyers ask themeselves the following question:
Where do I start? Buying a home can be a daunting task for first-time home buyers. The first step in purchasing a home should be to determine if they can afford a home. What many first-time home buyers do not realize is that there are many other costs to owning a home besides the monthly payment. They should speak with a family member or friend that owns a home and ask them what other costs they pay besides the monthly payment. This will help them get a good idea of all the costs involved with owning a home.

Since credit profile is an important underwriting criterium, it may be a good idea to obtain a copy of your credit report before the actual house hunting to see what your credit scores are. It will take time to correct any mistakes or credit blemishes on the credit report. Being prepared and proactive can save thousands of dollars by way of a lower interest rate.

When meeting with your loan officer to start the mortgage process you will be required to complete a mortgage application, along with providing supporting documentation that can include pay stubs, w-s2, tax returns, and bank statements.

If you have ever had a bankruptcy then I would strongly suggest that you have a copy of your bankruptcy papers and your discharge papers ready for your loan officer when you are getting ready to start the loan process. The more necessary information that you have at the beginning of the loan process the faster your mortgage transaction should go and the quicker you should be able to close on your home loan.

The application that the Loan officer is going to fill out with you gives the lender a bird's eye view of all your credit, income and asset history. The documenation that has to be provided is all the proof of what you put down on that paper. You must be able to show with documenation everything that you specified on your application. This would be your paystubs to prove income, your ID's to prove where you live, a Verification of Rent or Mortgage Statement to prove how long you have lived in a particular place.

It is always best to give more documentation than is necessary to your loan officer. Not only does it help with all the requirements that must be fufilled in order to get your loan done, it will even speed up the process.

If your meeting is over the phone, make the request to your loan officer that they email/fax the documents and details over to you beforehand so that you can both look at the numbers at the same time. It's much easier to have the numbers in front of you and discuss them than to try to remember all of the particulars as you discuss them over the phone.

It is a good idea to review your budget and determine how much of your income you can afford to spend on your mortgage payment. This will help your lender determine how much home you can afford to buy.

There's a lot of documentation to gather, and the task may seem daunting. But with the help of an experienced mortgage loan professional, the process is narrowed down to YOUR specific needs. This is usually determined through specific questions during your initial interview.

Many federal and state laws are in place to protect you as a consumer. These laws further require banks and mortgage brokers to disclose to you your rights. As proof of having done so, your loan officer will need you to sign various federal and state disclosures, which is then made a part of the mortgage loan application package.

Planning a budget before you begin looking to buy a home is a very important task. Many times people can qualify for mortgages that are much higher than what they can comfortably afford. By accepting a mortgage that is higher than what you would like to spend, you may have to change your lifestyle from what you are used to and you may end up living pay-check to pay-check instead of comfortably. Knowing the maximum that you want to spend on your monthly mortgage payment and the type of mortgage loan you want (ie: fixed vs. adjustable) can help you continue to live the way you are used to without having to sacrifice the luxuries you are accustomed to. When budgeting your money make sure you include estimates on what the property taxes and homeowners insurance payments will be on your new home as well. Your mortgage professional can help you work on your budget to make sure you buy a home that you are comfortable with and to make sure you have considered all expenses involved with a mortgage.

Also be sure to compare what bills you are currently responsible for versus what you will have to pay yourself once you buy a home. For example your water, cable, electric and garbage bills may be included in your monthly rent payments. When you buy a home these will be expenses above and beyond your mortgage payment. Of course if you are already making these payments yourself the shock will be minor.

Once you have met with a loan officer and have determined a purchase price with a comfortable monthly payment, its time to look for a Realtor. When talking to prospective agents you should pay closest attention to their experience and attitude. Is your agent trustworthy? Will they show you homes in your price range, or insist that you see larger or more expensive properties? Can they tell you about the local school system, your drive time to work, and where to get a good burger? Also look for the ABR designation. This means your agent is an Accredited Buyer's Representative and specializes in helping buyers.