Tally Your Expenses - All of Them
By Tammy Stoner, FrontDoor.com | Published: 11/01/2007
Be honest about what you spend and what you can afford house-wise.
Remember: Buy too much house and you'll be flat on your back financially. Be honest about what you spend and what you can afford house-wise. If you need more encouragement to be harshly honest about your expenses and comfort zone of monthly repayment, simply look at the number of home foreclosures nationwide this week.
Before you decide how much you can afford in monthly mortgage payments, calculate your expenses, including (as applicable):
- Loans - car, student, etc.
- Insurance - home, car, life, etc.
- Credit Cards
- Utilities
- Property Taxes (based on cost of the home you are interested in, or your own home -- for questions, call your local tax collector since rates vary)
- Food and Entertainment
- Kids' School
- Retirement Accounts
- Car Payment
- Gifts
- Doctors
- Vacations
- Charitable Contributions
And yes, lenders will ask for paperwork backing up all these numbers.
In a competitive market, consider preparing this monthly expenses checklist and collecting all associated paperwork (including bank statement, pay stubs, and tax returns) to get pre-approved for a mortgage amount. Though this isn't written in stone, it will show sellers that you are serious. It will also help to keep you in check when you fall in love with a home priced too far out of your pre-approved range.
GO TO: Part 1: Evaluate Your Life and Finances
GO TO: Part 2: Shop for a Loan
GO TO: Part 3: Find a House
GO TO: Part 4: Close the Deal
GO TO: First-Time Homebuyer's Guide
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