Don't Overextend On That Prairieville Home

Once you've decided to buy a beautiful Prairieville home, the big question is "How much house can I afford?"

You may already have a figure from the bank If you have gone to get pre-approval. This may be more or less than what you had in mind. It's only a starting point in your thought process. The perception is that bank puts the upper limit on what you can spend, but the lender may not take into account everything you need to consider.

How Much Can You Afford?

Some lenders use different percentages to figure out how should go for housing, but the most common guide to how much you can afford these days is based on the 28/36 rule. The means your housing should be 28% or less of your gross income before taxes, while your debt (not including your mortgage) should be 36% or less of your income. Based on an income of $60,000, you might be able to append about $1,400 a month on your mortgage, taxes, and insurance, but this would dip to $1,000 if you paid about $650 about for credit cards, car payment, and other loans. (Click here for a handy 28/36 mortgage calculator to compute how the 28/36% rule would work out for you.) Banks may use a magical formula based on your FICO score, but they are considering similar things: how your debt compares to your income.

With a household income of $120,000, your might be able to pay $2,800 for housing with no debt. What if your spouse is laid off? Do you have resources to help you make it for a while? What if one spouse wants to stay home with the kids? What if your salary stays the same but your other expenses keep increasing? Will you be able to handle increased energy costs if the home is bigger than your old residence? A mortgage you can technically afford can become a noose around your neck.

Bottom line, you need to be honest with yourselves. If you are saving for your kids' college or trying to keep them in private schools as well as number of expensive activities, a big house payment can cut off other life options unless your income increases.

Don't Sacrifice It All For Your Down Payment

You can reduce the amount of the loan and the monthly payment by putting more money down. It is a mistake to raid retirement funds ordeplete savings. Experts say you should have three to six months savings on hand in case of job loss, plus about 5 % of the purchase price of your home as a cushion for emergencies and repairs. In addition, you may need about 3-5% of the amount of the purchase price for closing costs and moving expenses.

The last thing you want to do is buy a house that develops a leaky roof six months down the road that you can't afford to fix. You are better off putting down less down payment - even if that means you buy a less expensive home or consider FHA financing, as that requires a smaller down payment. At this time, it seems like that an extension of the first time homebuyers tax credit is likely in some form, so you can probably plan on some assistance for either your downpayment or other move-in expenses.

Since home price and interest rates low, this is great time to buy an affordable house - but not to overextend yourself. Talk to Sandy Sandlin today about buying a Prairieville home Sandy's Team will give the most to date information about the status of the first time homebuyers credit, as well about the best properties in East Baton Rouge, Ascension, and Livingston Parishes.