How Much Can I Afford?

[David]

Before going out to look at houses, it is always recommended that you get pre-qualified, so you can find out how much the bank is willing to lend to you. How much they will lend versus how much you can afford is something you must decide.

A longstanding rule of thumb is the annual cost of the home must not exceed 25% of your your income. But don't just calculate the 25% based on the mortgage. You need to also consider utilities, water and sewer, taxes, repairs, insurance and garbage collection.

Also, is there anything that makes your situation a lot different than the average person, such as caring for a parent, or making child support payments? Definitely take a look at this before deciding. In some cases, you may want to make 20% your goal.

After all, you don't want to struggle to make the house payment. You want to enjoy the place you live.

[scorpionguy]

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[David]

First, welcome to the Mortgage Forums, and thanks for becoming the first member!

I feel for you. I was in a similar dilemna. All the houses that I could afford (and were in safe areas) were more than 45 minutes from the city, and this was not an option for to live this far away.

I have two things that I can offer:
1) Keep in mind there will be a significant tax savings. You will not have to pay as much income tax, because you will be able to deduct property tax and interest. This means that you can afford a slightly higher payment than you could when you were renting. This is especially true with a newer house. With an older house, the cost of repairs could but a damper on the tax savings.
2) You might want to consider an "all interest" loan. The loan is 100% front loaded with interest, but the house will likely still up in value, and you can still write an additional check each month (when you have the money) to "apply to Principal". I have a friend that just got a $300,000+ house and their payments are unbelievably low (like $1000/month).

I hope this helps.
Thanks,
David

[scorpionguy]

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[squirrel]

Hmmm... SG, I have the same problem! And it might be in a way worse than yours... I need to make a down payment to the bank which amounts to 25-30% of the amount of the loan.
If I were to buy, say, a studio (one room, one bathroom and one kitchen) in a safe area (and not expensive) I would need around Euro 15,000 if I were lucky!
So, out of these money I would have to pay to the bank Euro 3,750 - 4,500 before they gave me the loan! And I don't have the money to!
Imagine the monthly installment for the a.m. amount would be around Euro 200... my monthly wage is Euro 300!!! I've also considered asking my father to take a consummer loan for me for the amount I need to pay in advance, but in such a case the total monthly installments would amount to around Euro 250-260!!!
I can never imagine how on Earth I'd buy a house!!!

[Guest]

I would highly advise saving up the proverbial "nest egg" before attempting to buy a home. I put a hefty downpayment on a hefty loan, but I think it was adequate and I am glad I worked hard all those teen years and put something aside. Owning a nice palce of my own was, after all, a big dream of mine!

[David]

Is it possible you can increase your income a little. Maybe you can find a way to use your computer to make money through an American company. Feel free to PM or email me. I'll bet I could help you with that.

[DreamHouse]

with an income at only 60,000 (IN GA), I signed a contract to buy a house for 108,900. Now, I am questioning whether I can afford the house payments. Does this sound reasonable with 6 3/8% loan with a 30yr fixed no money down?

[freddyb45]

A lot of people, myself included, are struggling with mortgage repayments at the moment because of the housing crisis - what do people see as the short-term future for the housing market?

[jtrenton]

[walterboris]

Nice and very helpful Tips...