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Archive for the ‘Money’ Category

The dream of home ownership continues to drive many Americans. They want a permanent place to build a family. Even those that are in jobs that require frequent relocations still prefer to buy a house that they can then sell when they move. The equity they build in a property allows them to buy a better house the next time they move.

If you are thinking about buying your first house, you are likely hoping to achieve that American Dream. However, if you want to avoid the problems faced by so many during the recent mortgage crisis you need to be brutally honest with yourself about your financial situation. You need to assess whether you can actually afford to buy a house.

Start by looking at your true net worth . This includes liquid assets like bank accounts as well as tangible property like investments, other real estate, and other assets. Next examine your income and the stability of your employment. Do not inflate the likelihood of bonuses or promotions. Being realistic in this difficult economy may be disheartening, but honesty is the best policy when it comes to buying a home.

Now you want to look at your expenses. These include food, gas, car repair, insurance, health care and entertainment. You also need to look forward to account for expenses as you have children and they grow up needing clothes, food, schools, and medical attention. Make sure you budget for a healthy savings account as well as retirement planning. The money that is left is what you can afford to put towards housing. This may be more or less than you are currently paying for renting a home.

The final step is taking the cost of a specific house and deducting the amount of down payment you can pay. Then use a Mortgage Payment Calculator to figure out what your monthly payments would be for the remaining amount. This amount should fall within your housing allowance — with some wiggle room for home repairs, maintenance, utilities, and things like taxes and insurance.