When you buy a home, you are probably buying the most expensive purchase of your life. It should be very well thought out and there are several things to consider before you rush in. The major thing you need to ask yourself is if you can afford it. The last place you want to be in after you purchase a house is finding yourself strapped for cash and built up with lots of anxiety about your purchase. You especially don’t want to risk foreclosure for a simple mistake of not having thought about your purchase carefully beforehand.
There is some simple math that you can take into consideration when figuring what your price range is when buying a house. All you have to do is take your gross annual income and divide it by twelve. Then you need to add up all of your monthly expenses including credit cards, car payments, luxuries, cell phones, utilities, and any other expenditures. Banks will not let you go over 35% of your monthly income after taxes so then you need to multiply .35 of your monthly income and subtract the total amount of your monthly bills. The remainder that you have left over is what you’ll be able to afford for your house payment.
Also remember that it is best to have the biggest downpayment that you can on your house. This will not only drop the interest rate, but it will lower your monthly payments as the lending institutions will see you as less of a risk.
There are other costs that you need to consider in the closing of your house. The closing costs and points of the loan are two major expenses. These costs will be different for each lending institution so make sure you talk with several of them to get the best rates. Also these rates are always negotiable within reason.