Home-Financing Recommendations To Help You Get On Track With A Smart Purchase Budget

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When you are setting out on the path to purchase a home, you will want to make sure all your questions are answered, you are prepared, and you have the right type of help to get you through some of the more difficult parts of home-buying and purchase negotiations. To help you tackle the financial end of your upcoming purchase, there are several methods you can use to make sure you are prepared and have a good financial plan in mind. Here are some tips to help you determine how much you can afford on your home purchase.

Use a Quick Calculation Rule

When you are just starting out in the home-buying process, you might want to get some information as to how much you can realistically afford based on your income and your debt, including debt you already have. This helps you establish a limit when you might already have student loans, a vehicle loan, and one or two credit cards, for example.

A good rule of thumb is to make sure you spend no more than 28 percent of your gross monthly income on your new housing costs. This includes the mortgage payment, taxes, interest, and hazard insurance. And remember your gross income is the amount of income you earn before your employer takes out taxes and benefits. So, when you find a home you want to consider purchasing, divide the proposed monthly payment and expense amount by your gross income. It should be 28 percent or less to fit within this guideline. 

You should also look to spend no more than 36 percent of your total debt with your housing along with your other financial debts. So when you add up all your monthly payments to your loans and other debts along with your housing expenses and mortgage payment, it should be no more than 36 percent of your gross income. Your mortgage broker and your realtor can help you calculate these figures, which will be what your loan approval will be based upon.

Complete a Budget Analysis

Another way to help you calculate a realistic budget for your home-buying experience is to make a list of all your expenses and financial obligations each month. Be sure you list all your expenses, including items like savings account contribution, personal care, and eating out.

After you have listed all your expenses you can subtract them from your take-home income. You should have enough left over for your proposed mortgage payment and any other incidental expenses.

Talk to a real estate agent for more assistance finding a family home for sale