Can You Afford to Finance a Home?

Purchasing a home is one of the greatest events in a person’s life. Moving from a leased property to a property of your own changes everything. Affording the financing of a new home is an issue in itself. A commonly accepted number is that mortgage payments should not exceed one third of a family's monthly income. If the mortgage payment is more that this, it may cause undo stress on personal finances and result in default. There are major differences in various types of financing. The asking price of the house is not the only thing banks consider when deciding whether or not they should extend a loan to you. Work history, income, down payment and credit history all play a roll in obtaining a mortgage. Your interest rate can vary greatly based on each of these things.

Cost of Financing a Home

Sale Price
The cost of the home is the major factor that will determine if you can finance a home. Many factors determine the base cost of a home. The first consideration is the neighborhood it is in. A remarkably large home may cost less than a smaller home if it is in a less desirable area. Other factors include the size of the house, the number of bedrooms/ features, its condition, and the selling price of other recently sold properties in the area. "Comps" or comparable sales in the area will directly impact the price of a home.

Property Taxes
When financing a home, property taxes should be taken into consideration. The taxes must be paid yearly. If the taxes are not paid, the house can be repossessed and sold at a low price to satisfy the debt. Property taxes are generally added in with the mortgage when financing. Once the home is paid in full, it is the responsibility of the homeowner to remember to pay the taxes due.

Homeowners Insurance
Homeowners insurance is required by financial institutions prior to financing. This additional cost may be added to the mortgage payment while the house is being financed. It is wise to always keep homeowners insurance, even if the home is paid off. Any number of disasters can strike while living in the home. Without insurance, you could lose everything you own. It just takes a small fire or water damage to cost thousands of dollars in damage. Get several insurance quotes to obtain the best coverage at the lowest cost.

The total cost of financing a home consists of all of the above. When the figures add up properly, you will have a better grasp on whether or not you can afford to the financing. There is nothing like sitting on the back porch and realizing the home is yours. You have the ability to make changes when you wish. It also means a great deal of responsibility. Be prepared for all the little things that can go wrong because you will not be able to call the landlord to have it repaired. The investment is well worth it though. There is nothing more satisfying than owning your own home.