How Much Home Can You Afford?

Buying a home is a major expense that can take a big bite out of your income. In the past, the trend has been to buy as much house as you can possibly afford. This has gotten some homeowners into financial trouble, however, as they over stretch their incomes to buy a dream house. Remember that you have other financial obligations besides your mortgage, which may include raising children, helping with college tuition, and most importantly, saving for retirement.

Deciding How Much to Afford
Before you even start looking at houses, it's a good idea to visit us to determine what size loan you can pre-qualify for. But the most important move you will ever make happens even before you approach us. You need to decide how much you want to spend on a house. Descend into the practical and review your budget and financial goals to see how much you can comfortably afford. It's best to start house-searching with a clear picture of your financial goals (like retirement), how much money you will need to achieve them and how much time is left before you reach your goals.

But Wait…There Are More Costs
Once you have decided the amount you can afford to pay each month, you may think you're finished. However, there are several factors, besides the mortgage, that contribution to your total monthly payment. You must also take the following costs into consideration:

• Property taxes are based on the selling price of the house. An average property tax rate is about 1.5 percent of the purchase price of your new house, per year. However, you should call your county tax collector's office for the actual rate in your area and find out if other fees apply.
  
  
• Private Mortgage Insurance (PMI) is usually required if you put less than 20 percent down on a home and can amount to several hundred dollars a year.
  
  
• Comprehensive homeowner's insurance covers your house and most of its contents. Your insurance agent can give you an estimate of the cost.
  
  
• Utilities may become a significant expense. Once you've chosen a specific house, ask to see copies of the past two years of utility bills to get a rough idea of the cost.
  
  
• Repair and maintenance can also eat up more than you expect. To be safe, expect to spend one percent of the purchase price of the house each year on maintenance and repair.

Of course, if you own a home now you have a good idea of the hidden costs of home ownership. But don't forget to take closing costs, moving expenses and redecorating into account. For a practical and comprehensive look at the entire home-buying process, Visit our knowledgeable professionals. We offer a variety of home mortgage loans at competitive rates that can fit your budget. Our loan officers are professionals who know the home-buying process inside and out and can help you navigate your way through the paperwork. To find out how much you prequalify for, stop by any Union Bank Location or contact us.