One of the issues when it comes to buying a home is the mortgage payment. Can you afford it? This is an especially important point in the wake of the all the foreclosures from the subprime lending crash. You want to make sure that you can afford your mortgage payment, especially if you are considering an ARM and it will reset down the road.
How much of your income should go to a mortgage payment?
While mortgage lenders were fudging it for a while, things are coming back to the 28 percent rule: Your mortgage payment should account for no more than 28 percent of your monthly income. So, if you make $4,000 a month, your mortgage payment should be no more than $1,120.
But that's not all. You also need to figure that you will have to add in mortgage insurance, interest charges and property taxes. So, while you can use a mortgage calculator to figure your basic payment (with the interest), you still need to account for taxes and insurance. In many cases, these expenses can add $200 or $300 -- or more -- to your mortgage payment.
Take your mortgage payment for a test drive
You want to make sure you really can afford your mortgage payment, so take it for a test drive. Take the expected mortgage payment, plus taxes and insurance, and figure how much more it will be than your current payment. If you are currently paying $900 in rent, and your new expenses will be $1,500, that is a $600 difference.
Take that $600 and put it in an account (preferably high yield savings). Don't spend it. If you can go six months without that $600, then you can probably afford the mortgage payment. You can use that money as an emergency fund, or add it to the down payment.
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