So, you've decided that homeownership is right for you. Now you need to determine if you are financially ready to buy a house.
In this Step, you will find a number of simple calculations that you can do to evaluate your current financial situation, how much house you can afford and the maximum home price that you should be considering.
Once you understand these variables, you can make the best choice for you and even save money.
Test Yourself
To avoid any future surprises, you can do some financial exercises to see where you stand. They include: calculating your net worth, your current monthly expenses and your current monthly debt payments.
Knowing your net worth is important because you will need this information when you discuss a mortgage with your lender. Your net worth is the amount left over once you've subtracted your total liabilities from your total assets. It will also give you a snapshot of your current financial situation and show you how much you can afford to put as a down payment.
Next, use the tables below to determine your current expenses and debt payments. This will help you see what your actual monthly obligations are and what kind of mortgage payment you can comfortably fit into your budget.
Net worth: Your financial worth, calculated by subtracting your total liabilities from your total assets.
Mortgage: A mortgage is a security for a loan on the property you own. It is repaid in regular mortgage payments, which are usually blended payments. This means that the payment includes the principal (amount borrowed) plus the interest (the charge for borrowing money). The payment may also include a portion of the property taxes.
