Buying a home isn’t as complicated as some people make it out to be, but there are quite a few potential pitfalls. Buying a home isn’t like buying a lawnmower or even a car – not only is the price significantly higher, but the laws and regulations associated with purchasing real estate differ greatly from those for consumable goods. So whether you’re ready to take the plunge into home ownership for the first time or the tenth, there are several steps you must take to know if you’ve found the right home for you.
The general recommendation is no more than 28 percent of your gross income should be spent on housing costs and if you exceed 33 percent, you risk becoming “house poor.” House poor means you have a huge, beautiful home but cannot afford much else. Once you determine how much to budget for housing costs, you can move on to the next step.
2. Use a mortgage calculator to decide the price range you can afford.
Try using the Mortgage Max Calculator on Dinkytown to determine how much mortgage you can take on. Remember, this calculator gives you the MAX mortgage you should have, so plan on looking at homes priced considerably less so you don’t become house poor.
3. Check prices on comparable homes in your preferred area.
“Comps” are what they’re called in the industry. They’re just basically price checks on other similar homes. If you do your own comps, make sure you compare very similar homes. Make sure they match up on: