How Much of a Home Can You Afford?

Prior to the "market frenzy," there were some established "guidelines" which helped  potential buyers determine how much of a home they could afford.   Because of the current problems which have evolved due to changes in the "basics" about lending, many of the lenders have returned to previous lending guidelines.The previous budgeting standard was to look at a ratio of approximately 30% of income going to the house payment and approximately 40% of total income going to the total debt. 

Another factor to take into consideration, is the cost of commuting.  On my website www.azrealestatebuysell.com I have a commuter calculator.  With the cost of gas going up and up, the distance you have to travel to work and back can have a significant impact on your budget.  Buying a less expensive home because it is further away in a new area of development may not actually save you money. You should also consider the impact on you of the time spent commuting everyday in traffic.

In addition, there are also other costs to calculate.  Taxes, mortgage insurance, HOA fees and maintenance costs need to be included in your budget.  As we now see with the growing number of foreclosures, it is best to probably underestimate rather than overestimate what you can afford.  Everyone has unforeseen emergencies whether medical, loss of job, divorce, etc.  When buying a home, it is time for a "reality check" and based on the problems of the last couple of years a good idea to go back to the basics of  budgeting guidelines.