September  2, 2009

This is from a good article I found on www.frontdoor.comabout how you can avoid being in over your head on house payments if you are honest and conservative in figuring out all of your monthly expenses. 

In all your excitement about the prospect of buying a house, you'll be tempted to twist your financial numbers so you appear more desirable to a potential lender. Instead of admitting the balance on your Visa is $7,000, you give the more rosy figure of $5,000. It will be lower in a few months, right?

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, health 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-eating out, groceries, movies, etc.
• Kids' School
• Retirement Accounts
• Trips/Vacations
• Gifts
• Doctors
• Charitable Contributions

And yes, lenders will ask for paperwork backing up all these numbers.

It is also a good idea 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.

But keep in mind, that just because the bank is willing to loan you "x" amount doesn't necessarily mean you should take it (or at least not the whole amount).  You know your financial situation best.  Keep in mind any future expenses that you know are inevitable (i.e. you want to put you child in a private school, you will be having another child, you need to replace your car soon, etc.).  It's best to be on the safe side and enjoy your home without the constant worry about the bills! Maybe that 3 bed, 2 bath house will suite your needs just fine, compared to the 4 bed/2.5 bath that will stretch your budget...

Information obatined from:http://www.frontdoor.com/home-finance/Tally-Your-Expenses-All-of-Them/405

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Take a look at my market report for today!
http://www.ryanvaught.com/chicomarketreport

Currently Ryan has about 30+ listings in inventory, and has sold 23 homes in 2009. Please don't hesitate to contact me with any questions about Chico area real estate.

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