Home Buying...

I was reading in one of my many mags, Parents, and came across an article called "The New Home-Buying Rules". I figured I'd share this little section of it, if you're interested in the entire article click here. Whether your a ways away from buying, or looking now, I think this little "worksheet" is a good way for you to get an idea of things.

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Figure out what you can afford.
As alluring as home ownership may be, you need to be on solid financial footing first. Don't begin your search until: 1) You have enough stable income to handle the expected monthly mortgage payments; and 2) You have ample cash on hand to cover the down payment and closing costs. Use this family-specific worksheet to see whether you're there.

Mortgage Math
A. Enter your monthly gross (pretax) household income ___________________

B. Multiply line A by .36 (mortgage lenders generally want your total debt payments to stay below 36 percent of your gross income) ______________________

C. Add up your monthly debt payments (student loans, car payments, credit cars, etc) _______________

D. Calculate how much you spend on child care or preschool/school each month _______________

E. Calculate how much you contribute to a college savings account per month ________________

F. Add up the totals from line C, D, and E ________________

G. Subtract line F from line B _________________

H. Multiply line A by .28 (mortgage lenders generally won't approve a principal and interest payment larger than 28 percent of your monthly income) ________________________

I. Write the smaller of line G or H here ________________

Buying Budget
J. Divide the number you came up with on line I (above) by 5.44 (the average monthly interest cost for every $1,000 you borrow, based on a 30 year fixed-rate mortgage at 5.125 percent, the typical rate at press time) _________________________

K. Multiply that figure by 1,000 _______________

Now, on line I is the largest monthly mortgage payment you can comfortably afford. Note: Lenders don't include child care, school, or college-savings expenses, but families should factor them in)

On line K is the most money you can afford to borrow.
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