Can You Afford a Home?

If you are presently renting, it's a good idea to take a look at rent versus a mortgage payment that means in the end, you own where you live. Most rental arrangements do not include utilities, but may include "perks" such as laundry and other facilities that you'll have to factor into just what it costs to rent. Then it's time to look at the cost of buying.

Consider that when you own a home, there are expenses you didn't have when renting, including:

• Routine maintenance, and unexpected repairs
   
• Utilities, including phone and lights/power
   
• Homeowner and property insurance

Those are going to have to fit into the family budget, along with your mortgage payments. As a rule of thumb, most lending institutions will look at your total income and allow 25-28% of the monthly amount, to cover the loan payment. This includes principle, interest, taxes and insurance. FHA loans allow the payment to equal 29% of gross income.

Once you've determined that your financial status is stable, you can proceed by taking your gross income, listing expected expenses, making a budget, then calculating the amount that may be allowed by lenders for a loan payment. Doing some groundwork, can save the disappointment of deciding on a house that won't be affordable from the lender's point of view.