Can I Really Afford That House?

Just because you may be pre-approved for a certain amount for a house doesn't always mean you can really afford that much. This is why one of the most important things that you can do once you've decided you are ready for home ownership is to set up a budget.

Your bank may be saying you can afford a certain amount based on your income and debt, but there is much more to what you can really afford. Only you can determine your exact living expenses which may include child care, hobbies, yearly vacations and your list could go on and on. You have a certain lifestyle that you are accustomed to and these expenses are not calculated into the amount the bank gave you. This is why so many people wind up "house poor". They wanted the biggest and best house the bank said they could have and never gave a second thought to what they could really afford.

So, before you even go to a bank for pre-approval, get a handle on your personal budget and determine for yourself how much of a mortgage payment you can comfortably afford and still be able to maintain the lifestyle that you want to live. You may decide that you can live without a few things to get the house of your dreams so this is just one more reason why knowing your budget is so important.

You can find a ton of help and different form styles to help you figure out your budget if you google "cash flow statements". It may seem overwhelming at first but it will be the best thing you can do for yourself now to make sure that YOU don't wind up "house poor" later on down the road.