I'll be doing a series on Buying Your First Home but most of the information would benefit all of us in our home buying decisions. Please bring any Questions you have and let's find the Answers!
First things first! That dreaded "B" word. Let's talk BUDGET.
I'm sure you've all heard of the record foreclosures in Texas this past Summer. My personal goal in this business is to do my part to insure that my clients don't get so much HOUSE that it becomes a burdan instead of the blessing it should be, a HOME.
Your house payment should be no more than 28% of your monthly income. So if you bring in $40,000 (gross) a year, your total payment should be $935 or less. A few things to look out for here: Total Payment = principal, interest, tax and insurance, and HOA fees. Don't fall into that trap by not knowing your required taxes and HOA fees!
Part 2 of this is what is your debt load. Do you have 3 or 4 credit cards maxxed out? Do you have a couple of car payments? What about school loans? Ideally, you would want to have your debts paid off when you go home shopping, however mortgage companies generally use a 28/36 ratio for a conventional loan. 28 being your monthly payment, 36 is your recurring debt load. Do your credit card payments, loan payments, child support payout total 36% of your income or less? Back with the $40,000 income that means your total debt payments each month can only be $1200. Watch out for that hole! These are minimum guidelines for the mortgage companies. Not neccasarily what your real life budget can bear!
Okay, let's look at the math of this: Here's our family budget, $40,000 / 12 is about $3333 gross pay per month. Depending on your taxes that translates to approx. $2667 take home.
Income | $2667 |
House Payment | - $935 |
Debt Payments | -$1200 |
Groceries, Gas, Car Insurance, Child Care, Electric Bill, Gas Bill, Water Bill, Medical Bills, Movies, Restaurants, Christmas, Birthdays, Charity, School Clothes, Vacation, Car Broke Down, Dog Gets Sick, Cable TV, Speeding Ticket, New BBQ, Life Happenings | $532 |
Does the rest of your life cost $532 a month or less? It's very important that you find a qualified Realtor and Lender who can not only sell you a house and a loan but one who will look after your best interests.
NEXT: Down payments and closing costs
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