Step 1
Get Pre-Approved. The only way to truly know how much home you can afford is to ask a lender. Getting pre-approved lets you know how much you can afford before shopping for your home.
What to Know:
- Income: Stable income assures a lender you can make your monthly mortgage payment.
- Debt: Add up auto payments, credit card payments, student loans, alimony, child support, and other debt.
- Cash: Total assets, amount in checking and savings accounts, and other investments.
Step 2:
Determine Monthly Mortgage Payment Including Escrow.Escrow is a third party account used to retain funds including the property owner's real estate taxes and hazard insurance premiums. Escrow is only applicable in certain loan programs.
Step 3:
Understand Bills Associated with Homeownership.
Estimate that it will cost about one percent of the purchase price per year to maintain your home. For a $200,000 home, you should budget approximately $2,000 per year or approximately $170 per month for maintenance. Condominiums and co-ops will have regular maintenance fees. You will also have utilities, gas, electric, water, sewage, cable, telephone, insurance, property tax, etc.
Step 4:
Establish Future Priorities and Plan for the Unexpected.
- What are your needs for the new home – furniture, lawn equipment, barbecue grill?
- Do you plan on a new car in your near future?
- Do you plan to have children?
- How long can you survive if you lost your job?
