How to Afford Homeowner Payments

Owning a home is the all-American dream. Many people strive to be homeowners, because it can be a great investment. Financially, owning a home gives us equity and helps to build our credit. On the other hand, owning a home can have devastating effects if we buy a home that is way past our means.

Before diving into a mortgage, there are many things to consider. The last thing you want to do when purchasing a home is to get in over your head. Fortunately, there are ways to determine how much you can afford to spend on your new home. First of all, there is something called debt to income ratio. This is a measurement of your income against your debt; it weighs how much money you bring in against what you will be paying. A rule of thumb is that you should not spend in excess of 3-4 times your gross annual income. That means if you make $100,000 a year, you can purchase a home for between $300,000 and $400,000. Of course, this also depends on your monthly debt. If you have a high debt-to-income ratio, you may not qualify to spend this portion of your income on a home.

Purchasing a home requires you to be responsible in your thinking. Sometimes people make the mistake of thinking because they are approved for a loan, it means it is the best financial deal for them. Purchasing a home requires us to be responsible with our finances so that we do not get into financial trouble or wind up with a foreclosure on our records.