Buying a home is likely the largest purchase you'll ever make!

Buying a home is likely the largest purchase you'll ever make.

It's important to determine how much of a house you can afford when you're starting the process.

To calculate how much home you can afford, there are a few factors you should look at:

� Interest rate -- This is determined by your credit score. If you have a good credit score,

 you will have a lower interest rate. Bad credit? You'll have a higher interest rate.

� Property taxes -- The amount of property taxes you pay depends on where you buy a home.

 
� Private Mortgage Insurance (PMI) -- If you are not putting 20% down, you may be required to

pay mortgage insurance, which would be added to your monthly insurance premium.

� Closing costs -- These are the costs associated with closing on your new home,

which can include such things as mortgage application fees and inspection fees.

� Housing ratio -- This is the percentage of your monthly gross income that goes towards housing payment.

A rule of thumb is that your housing ratio should not exceed 28%.

� Debt-to-income ratio -- This is the percentage of your monthly gross income

that goes toward paying monthly debts including housing. A rule of thumb is that this should not exceed 36%.

� Homeowners Association fees -- If you're moving into a neighborhood with a Homeowners Association (HOA),

you'll need to factor in the HOA fees into how much you can afford. Some are less than $100 per year,

other times they are several hundred dollars a month.

� Utilities -- Be sure to include utilities such as heat, electricity, water, sewage, trash removal, and cable services

into your monthly budget.

While these calculations are important to consider, how much home you can afford is more than a matter of what you're preapproved for.

It's important to account for lifestyle expenses, future expenses and life changes that may add

unexpected budget items in the future.

Some questions you should ask yourself would be: How old is your car? Will you be replacing it soon?

Are you planning for a family? How old is the house you're purchasing? Will there be a lot of repairs?

Are you planning on furnishing your new home? Will you!

Despite what you hear about lending standards being much tighter post financial crisis � and that you absolutely need 20% down to buy a home these days � there's still the option of an FHA mortgage that requires just 3.5% down. For the median U.S. home price that would be just $7,100, and it's assistance like this that's helping families achieve first-time homeownership.

An FHA loan, which is insured by the Federal Housing Administration, and because the government backs it, banks feel comfortable lending money to borrowers for less money down.

Low down payment is good, but the mortgage payments will be high and not mention PMI.

be careful people... fha terms changed back in june. PMI now stay for the lifetime of the loan - not just for the first 20% of equity - plus they want an upfront cost of thousands just for the privilege of doing a FHA  mortgage. 

So a person buying a modest sized home in a typical neighborhood for 100k would need close to 26k  to buy a house without FHA.

TAD45. The system for early mortgage payoff are solving people problems with real life solutions: Such as low monthly payments, easy ways to build your dream home.

By: Dan Humphrey

http://www.tad45.com 

I will see you at the top!!!