I am a very big fan of Money Queen Suze Orman. On one of her recent shows, she had a wonderful idea about figuring out how much home can a new buyer afford. Today I'm going to give you the tools to figure that out by "Playing House."
* Choose how much home you want to buy.
* Only start this process if you have 20% down on this home of your choice.
* Go online and use a mortgage calculator and online resources to figure out the following monthly expenses:
1. 30-year fixed rate monthly mortgage payment
2. Monthly Property taxes
3. Monthly Association Fees, (If it's a Condo, Mobile Home or PUD)
4. Monthly Home Owners Insurance
5. Monthly Home Maintenance (Yard, Periodic Painting, Termite Repairs, Roof, etc.)
*Total up all the costs for items 1-5, under step #1, and this will give you the total monthly cost of owning the home.
* Use your total at the end of Step #1 and subtract it from the monthly rent you currently pay. This will give you the additional amount you currently would have to pay for a home of this price.
* Start saving the additional amount you figured out at in Step #2 for 6 months.
* This will help you see what it feels like to own your own home.
* If this amount is too difficult, then you are purchasing too much house.
* If it's easy, you now have 6 months of saving to use towards your closing costs and down payment and you should call your favorite realtor, me, to begin your home search.
I hope this was helpful! This will also help you see if renting is comparable to the monthly cost of buying a home in this current market. Please comment below to give me feedback on this blog post.
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