In order to know about
your homebuying potential, it will be useful for you to
take a look at your income, savings, monthly expenses, and
debt. All of these are important factors in how much mortgage
you can afford and also in how purchasing a home can affect
your monthly budget.
Together the following
four categories are a guide that will give you a
better understanding of your financial situation. Just print
this page, and fill in the blanks for each of the categories
listed. Use this information when you visit the Affordability
Calculator.
1) Review your
income. Purchasing a home may require that you have
a certain amount in savings that can be applied to your
down payment and closing costs. If you don't have a lot
of cash available, there are loan programs available (especially
through FHA and VA mortgage programs) that do not require
much cash payment at closing. Some questions to consider:
- On average, what is
your monthly income?
- Will your income remain
stable in the near future?
- Are you expecting any
increase or decrease in income in the near future?
Here is an example
of some income categories to help you estimate your monthly
income.
|
Income Category
|
Monthly
|
|
Borrower's Salary
|
$ |
| Co-Borrower's Salary |
$ |
| Taxable Interest |
$ |
| Investment Dividends |
$ |
| Other Income |
$ |
2)
Review your savings.
A little savings can help a great deal when planning to
purchase a home. There are some costs that you cannot finance
through your loan; you have to pay those at closing,
the day that you buy your home. Some questions to consider:
-
What portion of your income are you saving?
- Can
you save more money than you are now?
Here is an example of some savings categories to help you
estimate your monthly savings.
|
Savings
Category
|
Monthly
|
| Savings
Account |
$ |
| Checking
Account |
$ |
| Retirement
Fund Contributions |
$ |
| Stocks,
Mutual Fund Investments |
$ |
| Other
Savings |
$ |
3)
Monthly expenses may increase. The
purchase of your home will likely change how much you will
need to spend on expenses every month. If you have trouble
saving now, your finances may be too tight with the purchase
of a home. Some questions to ask yourself:
- How will the purchase
of a home affect my monthly budget and my ability to save?
- Can I support the
additional expenses that the purchase of a home will bring?
- Do I expect to maintain
a stable income for the foreseeable future?
Here is an example
of expense categories to help you estimate your monthly
expenses. This can be useful to determine your current monthly
expenses and to estimate how these expenses will impact
your budget.
|
Expense
Category
|
Monthly
(current)
|
| Utilities |
$ |
| Car
Expenses |
$ |
| Insurance |
$ |
| Medical
Expenses |
$ |
| Clothing |
$ |
| Taxes |
$ |
| Entertainment/Purchases |
$ |
| Child
Support |
$ |
4)
Review your debt responsibilities.
Consider how your debt in relation to your income will influence
a lender's decision on your mortgage loan amount. Carefully
consider how additional debt from house payments, on top
of your existing debt, will restrict your lifestyle. Some
questions to ask yourself:
- How much debt
can I afford to manage comfortably?
- Will I be able to
manage my debt responsibilities through the life of my
loan?
|
Debt
Category
|
Monthly
|
| Credit
Card |
$ |
| Car
Loans |
$ |
| School
Loans |
$ |
| Alimony |
$ |
| Child
Support |
$ |
| Other
Personal Debt |
$ |
