Calendar Recipe Box Shopping List Address Book

Your First Home

Your First Home

Know if you can afford to buy your first house!

By Gary Foreman

  Print: Full Page
Text Only
  Email: Article
   Find: More Articles

If you are thinking of buying your first house, it’s always better to find out if you can afford one before you begin shopping seriously. With relatively low mortgage rates and home prices in flux, many people are wondering if now is the time to buy their first home.


Do You Have Enough Savings?

How much would it take for you to get into a house? Affording one means more than having enough cash for a down-payment. Initially, you will need enough savings to cover a down-payment, the closing costs and some initial expenses like utility deposits.


You also need some cash for some of the expenses that come with a first home -- things such as a lawnmower, a ladder and basic lawn implements. Home centers love first-time homeowners!


Naturally, the down-payment is the biggest item. It usually runs from 5 to 20 percent of the price of the house. Expect to pay higher interest rates on your mortgage if your down-payment is lower. 


Many mortgages have fees or “points” associated with them. It’s not unusual for that to add 2 percent to the amount you will need at closing.


Closing Costs

Closing costs vary by locale and by what you negotiate in the contract. You can use 3 percent as a guesstimate, but that could be off by as much as 2 percent depending on the circumstances of the contract.


Some regions customarily allocate more expenses to the buyer than other places. Ask someone in the local real estate industry what costs typically does the buyer pay.


A few quick calls to the utility companies should give you an idea of any required deposits or set-up charges.


Can You Afford Ongoing Expenses?

Most experts agree that housing expenses shouldn't exceed 35 percent of your after-tax, spendable income. You can calculate your annual after-tax income using payroll check information.


Unless you got a large IRS refund or had to write a large check last April, you probably can use the net figure from your paycheck. All you need to do is figure out how many paychecks you will get in a year and then multiply your after-tax pay by that number.


Another benchmark that some advisers use is to total all debts and then compare that to income. The reason is simple. The part of your paycheck already committed to car payments or credit card minimums is not available to pay the mortgage.


Typically, experts suggest keeping total debt payments to less than 40 percent of income. If your estimate of a mortgage added to you existing payments exceeds 40 percent, you might be wise to try to pay down some debt before you begin house hunting.


Enter your email address to receive delicious, family-friendly recipes, exciting promotions, helpful articles and more delivered right to your mailbox. What could be better?

How to Deal with Debt
There are ways to conquer debt.
View Full Article

Manage Your Mortgage
How you manage your mortgage can make a big difference in your financial well being.
View Full Article

Keep Track of Spending
Help tracking spending and earnings
View Full Article

Prepaying Your Mortgage When You Expect to Sell
If you are wondering about paying down your mortgage, consider the numbers.
View Full Article

Finances and the Family
By FamilyTime
View Full Article

Toll House Famous Fudge
You can`t beat the original. Satisfy your chocolate craving with some Toll House Famous Fudge. <BR>

Nestle Toll House Checkerboard
This Tollhouse Checkerboard has 'eye appeal' as well as 'taste appeal'. Easy to prepare. It makes an attractive dessert on the pot-luck and buffet table too.

Toll House Chocolate Cheesecake
An easy chocolate cheesecake with a chocolate chip crust.

Toll House Chocolate Cheesecake
An easy chocolate cheesecake with a chocolate chip crust.

Toll House Easter Basket Fudge
Who wouldn't be thrilled to discover rich, creamy fudge in his or her Easter basket? Especially if they're colorfully decorated. So quick and easy, you can treat your little ones with all three varieties.

Tagged With: house, mortgage, debt, downpayment, taxes

Simply fill out the required fields to begin enjoying the benefits of – it’s fast and it’s free.
* required

Concerned about privacy? Rest assured, we never sell or share your personal information.
See our Privacy Policy.