How Much Home Can You Really Afford?
Tuesday November 4, 2008
It wasn't too long ago that banks were willing to lend people more than they could truly afford. While the credit crisis has tightened lending standards so that this isn't as common, prospective home buyers still need to have an idea of how much they can really afford. Knowing how much you can afford right off the bat can help make sure you're focusing your efforts on homes in the right price range.
Not only that, but a quick calculation can give you a rough idea of how much the monthly payment will be so you can work it into your budget. But, don't forget that buying a home comes with a lot of additional expenses that you might not otherwise think of, so you can also allocate room in your budget or final sale price for these as well.
Comments
Thanks for posting this. I think it is very important to say.
When I bought my last house, one loan officer (who did not get my business) flat insisted that I take a 30-year note, and if so, I could qualify for twice the money than I wanted to borrow. She wouldn’t take “No, thank you.” for an answer.
Today, I have my house half-paid for, and a monthly payment I can still afford. My house is my biggest purchase EVER (and probably will be for my lifetime). Knowing what I could REALLY afford day-to-day saved me thousands of dollars in the long run, and untold heartache and misery.
–Jerry
Our Frugal blog.
I think you’re absolutely right about planning your budget first before purchasing a house. There’s a lot to consider especially the small ones, like the one you said about additional expenses. It seems tempting if you see such a nice house but way off your budget. Especially in this point where financial crisis has really affected major lending comp[anies and individuals like us. Practicality might be the key in these hard times. Online calculators would be helpful in budgeting and estimating you personal finances so that you could have an overview of what you should pay in the future, and for you to save more. There are helpful financial sites that can offer assistance in searching for online information on these kinds of matters. I agree that buy only what you can afford.