Are You Ready To Buy?
To discover your home buying potential, calculate your: Income, Savings, Monthly Expenses, and Debt. These factors determine how big a loan you can afford and how buying a home will affect your monthly budget.
Review all of your sources of income. You will need money for a down payment and for closing costs. The FHA and VA have mortgage programs that require smaller down payments. Closing costs may sometimes be rolled into the mortgage.
Answering these questions may also help you to estimate your financial position.
- What is your average monthly income?
- Do you expect your income to remain level in the near future?
- If not do you expect it to increase or decrease?
Add up your savings. Any money saved can help you buy a home. Your savings can be used to pay the down payment and/or closing costs. You know your own saving habits.
- What portion of your income are you saving now?
- Can you afford to put more money into savings?
How much are you spending each month? You can expect your monthly expenses to go up when you buy a home. Will you have enough money to pay the mortgage, insurance and property tax in addition to your other expenses?
Review your current debt obligations. A lender will examine the ratio of your debt to your income when deciding how much money to lend you.