Before signing the dotted line, you want to know your monthly mortgage payment,homeowners insuranceand property taxes.
And thats just the beginning.
Lets face it: Saving up to buy a home ishard,especially in this economy.
Chris Zuppa and Sherman Zent/The Penny Hoarder
If youre having trouble reaching your savings goals, consider a new income stream.
How Much Money Do You Actually Take Home?
The first order of businesswhen making a budgetis to determine how much of your income is available to you.
Knowing your take-home pay will help give you an idea about what size monthly house payment youre comfortable with.
Youll need to factor in other debt payments, like a car loan or student loan payments.
Most experts recommend spending no more than 25% of your take-home pay on your home.
Keep in mind that lenders might approve you for more.
But dont let the offer of a bigger loan tempt you into spending more than youre comfortable with.
And dont forget anemergency fundwill be more important than ever when you own a home.
Thats your consumer DTI.
But lenders prefer your overall DTI the one that uses your gross (or pre-tax) monthly pay.
Also, keep in mind the overall DTI doesnt include monthly expenses like groceries, gas and utilities.
It basically includes the items that will show up on your credit report.
So whats a good DTI?
For mortgages specifically, 43% is generally considered the upper limit for getting approved.
The more your down payment, the less youll have to borrow.
With that in mind, most experts recommend 10% as a minimum down payment.
But to really reduce your monthly payments, you should aim for at least a 20% down payment.
By doing that, you wont have to pay for private mortgage insurance, or PMI.
Mortgage insurance is required by most lenders as a protection against you defaulting on the loan.
That leaves your total loan amount at $160,000.
And nothing down at all would result in a $1,797 monthly payment, plus $67 for PMI.
Total:$1,864.
(Keep in mind that all of those figures dont account for property taxes or homeowners insurance.)
Then, get thatpre-approval letter.
Heres a guide to some common terms.
If you oughta wrangle your budget, it may be time to consider a savings challenge.
Since they arent included in the sale price, they can catch a lot of first-time buyers off guard.
Closing costs cover a litany of things such as lawyers and title fees and taxes on the transaction.
Homeowners insurance rates vary by region and state.
The age, condition and size of your home will also affect how much you pay.
How Much House Can You Afford?
Listen, we know its tough out there.
But theres no shame in asking for help.
These companiesmake it easy to help yourself and your bank account.
The others fall above their monthly housing budget.
It also gets rid of that pesky $152 PMI payment every month.
Robert Bruce is a senior writer at The Penny Hoarder.
