Determining How Much You Can Afford Per Month

Determining how much you can afford per month is an important task anytime you are looking to adjust your spending habits. If you do not take the time to evaluate if you can handle a new expense, you could be putting yourself in a tough financial situation. Anyone who has had a car repossessed or their home foreclosed on knows the dangers of assuming more than you can handle.

The Search for Your Dream Home

You are sick of renting your apartment and just want to own your own home. You picture yourself sitting on your couch in the quiet of your single family home just enjoying your evening reading a good book. The walls in your imaginary home are not the standard off-white color of your dreary apartment. Instead they are vibrant colors as you now have the freedom to decorate your own space.

Suddenly you have this strong desire to turn your dream of homeownership into a reality. You contact a local realtor and tell them with pride that you are in the market for your first home. You paint for them the picture of what your dream home looks like and you set a date to go in search of that magnificent property together and before long you will be disposing of garden yard waste and other homeowner tasks.

You meet with your real estate agent and, after the courteous introductions and shaking of hands, you begin your journey together to find your new home. You see several homes before you stumble upon a hidden jewel and as you enter the front door of your this house you immediately fall in love. In that moment you are sold and determined that this house will be yours.

Budget Your Payment

Before you sign on the dotted line, you need to rewind and complete an important step. You must first take a look at your budget to discover what you can afford to pay before you take on the reasonability of homeownership. This will help you be sure that you can always make your mortgage payment and stay in your new home for many years.

In order to do this you will need to take a look at past spending habits. If you have not operated within a monthly budget, now is a great time to establish one. Make a list of all of your expenses and your income and from there you can determine how much you can afford to spend on your mortgage, property taxes, utilities, homeowners insurance, and other homeowner expenses.

The next step is to figure out what homes are in the range of the mortgage payment you can afford. There is no point in looking at houses whose mortgage payments would be twice what you can handle. A great way to avoid putting yourself in a bind financially is to talk to your bank before you begin shopping for your dream home. Let them know your targeted monthly payment and available down payment. From this they can determine the price range you should look at and can even pre-approve you for a home loan.

After you have that final figure you are an educated buyer. You are beginning your search with vital information that will protect you from going in over your head financially. Avoid looking at homes that are far beyond your price range. And, make sure that you your realtor knows exactly what you are looking for and stick to that. By determining how much you can afford per month before you begin looking for a new home, you are ensuring that your final choice does not exceed your budget.

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