by Todd Pheifer

Created on: July 25, 2008

Buying a house is one of those experiences that are both exciting and terrifying at the same time. It is exciting because home ownership is a dream of many people today, which means that it can generate great excitement when acquisition appears possible. At the same time it can be very frightening, because most people have to take out a large mortgage, which means that they are borrowing a staggering amount of money. The amount of money in a mortgage can seem almost unreal, because most people can't quite wrap their head around the actual amount and what it means. There is also the fear of losing a house, which causes great stress in some people. Because of a rising interest rates and an uncertain economy, well-meaning and hard-working people can find themselves in situations where losing their house is a definitive reality. Therefore, calculating a potential mortgage payment is an important process and should not be taken lightly. Here are a few thoughts on determining how much of a mortgage a person or family can afford.

WHAT IS INCLUDED IN THE PRICE?

There are many mortgage calculators online that can give people a rough estimate of potential mortgage payments. Those are helpful, but they aren't necessarily the whole story. Potential homebuyers also have to remember that there are other costs associated with buying a home. For example, if people do not put down a large enough down payment, they may have to pay property mortgage insurance (PMI) until they reach that down payment. Also, there is homeowners insurance to consider and property taxes. The property taxes can be a considerable amount, particularly in certain states. Homebuyers should also consider what kind of home maintenance costs they might incur. A house has to pass inspection in order to be sold, but that doesn't mean that something isn't badly in need of an upgrade once the house is occupied. There are also other maintenance items to consider, such as yard care, watering, cleaning products, and basic improvements such as paint.

BUDGETING IS KEY

Figuring out a possible mortgage payment is all about putting together a budget. The family that wants to buy a house must sit down and realistically map out their income and expenditures. That means documenting worst-case scenarios, unforeseen expenses, and possible resources that can be tapped in a "pinch". It is possible for people to make lifestyle changes in order to buy a house, but they should be realistic about those changes. Too often people change their habits on a temporary basis, but they soon fall back into their old ways, which causes them to get into financial trouble.

Buying a house can be very exciting, but people should not get ahead of themselves. Instead, they should carefully consider all costs, weigh their options, and make a balanced decision. Otherwise, emotion and wishful thinking can get them into deep financial trouble.

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