If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed.

 Determining the affordability of a home is a crucial starting point. Remember that qualifying for a loan amount doesn't necessarily mean it's financially comfortable for you. It's important to be cautious and not stretch beyond your means. Lenders typically require that total housing costs stay below 33% of your gross monthly income, with total debt payments (including the mortgage) not exceeding 36%. Being conservative in your planning is wise. For instance, if you earn $40,000 and have no existing debt, a lender may consider $1,100 in monthly housing costs suitable. With an $80,000 income, you might qualify for $2,200.

When calculating the price of a home you can afford, consider factors like the down payment and type of financing. As an example, the Mortgage Qualifier calculator illustrates how these variables impact monthly housing costs. Additionally, be prepared for various upfront costs associated with purchasing a home. Plan ahead for expenses like furniture and consider delaying major purchases to enhance your financial position as a new homeowner.

While a 20% down payment used to be the norm, it's now possible to buy a home with a smaller down payment. Explore options such as a second mortgage, government programs, or private mortgage insurance (PMI) to avoid the 20% requirement. However, keep in mind that a larger down payment works to your advantage, improving financing terms, reducing the amount borrowed, and lowering monthly payments.

Earnest money, typically around 2% of the home price, serves as a deposit to show your commitment to the seller. If your offer is accepted, this amount is applied to the down payment, but if rejected, it's returned to you based on the contract terms. A home inspection by a qualified professional helps uncover hidden problems and may cost several hundred dollars.

Closing costs, which encompass fees like attorney charges, title insurance, appraisals, points, and tax escrows, are typically paid upfront and range from 3-5% of the purchase price. Lenders often require proof of post-purchase reserve funds, usually equivalent to at least two months' worth of housing payments, either in savings or assets, as a precaution against cash flow issues.

Consider additional expenses like moving costs and new furniture, especially if you're purchasing a fixer-upper or a home without major appliances. To prepare financially, it's crucial to save a substantial amount. Create a savings plan by determining the required amount and dividing it by the number of months you have until your desired purchase date. Example: If your objective is to save $12,000 and you want to purchase a home in three years, then you’ll need to set aside about $333 every month ($12,000/36). 

Automate regular deductions from your paycheck or checking account into a separate savings account. Assess all your assets, including retirement accounts, stocks, bonds, and valuables, as potential resources to supplement your savings plan. 

If you found this information helpful and would like to know more, drop us a line at agent@apolloshome.com. In addition, Apollo's Home Blog below will provide further information through weekly articles.