How Do I Know If I Can Afford to Buy a House?

If you really want to buy a house, you need to really determine whether you can afford it or not. You don't want to make yourself house poor and not have any money left for savings or an emergency. You can end up over extending yourself and not be able to make you mortgage payment and risk foreclosure.

Analyze Your Current Expenses

Most new homeowners grossly underestimate the expenses of homeownership. All the costs involved with owning a home (monthly mortgage payment, cost of moving, possible repairs, other monthly costs of taxes, insurance, and property maintenance), are higher than the amount you were previously paying in rent. If these expenses are going to be higher than what your current rent payment is, ask yourself this question, can you afford to pay more for housing? With your current rent payment, do you have extra money left over every month? Do you have money left over from your paycheck? If not, you need to change your spending habits or you cannot not afford to buy a home. You may want to consider a smaller or less expensive home that fits into your budget.

Have you ever planned a budget? If not, you probably have no idea how you spend your money. If this is true for you, you need to determine your spending habits. You need to start planning a budget.

There are two types of expenses, fixed and discretionary. Fixed payments are payments such as your car payment, taxes, and day care. Discretionary is spending money on things like entertainment and clothing and are items you control how much you spend on them.

It basically comes down to how important it is for you to buy your own home? Are you willing to cut back on your spending and put off some of your purchases? You can practice meeting your expenses by calculating your mortgage payment and put the difference you paying now for rent in a savings account. If you can manage to do this you might be ready to actually buy a home.

You should never think about buying a home unless you can handle the mortgage payments and any other related costs. If you do not pay your mortgage as agreed you can end up in foreclosure.