Impact 5: How much home can you afford?

Deciding how much home you can afford can be difficult. Over-sized mortgage payments are what got so many homeowners into trouble in this housing crisis. Experts say before you start shopping, you need to figure out your monthly budget.

Christian Penner, an experienced mortgage lender in Palm Beach County, said you need to find a lender who's knowledgeable and trustworthy.  He said he or she can work with you on putting together a budget to help figure out how much home you can afford.

"We sit down with them and we work out a monthly budget with them, and we figure out what that monthly budget is, and then we kind of back in some numbers, to figure out what price of a home they can afford," Penner said.

Penner pointed out we all have unique monthly expenses that we need to take into consideration when figuring out how much we can afford on mortgage. suggests you don't want your mortgage expenses to be more than 28% of your monthly income. And you don't want your overall debt-to-income ratio to reach over 36% of your gross income. That includes debts such as student loans and your car payment.

You also need to consider the hidden costs of homeownership, it's not just your mortgage you're paying.  Taxes, insurance, homeowner association dues, assessments, and upkeep. Those are all expenses that can add up fast and cut into your mortgage budget quickly.

Penner said  you may find out during your search that now is not the time to buy for your family. He said potential buyers who need to repair their credit might need to wait a little longer.  You might also want to hold off if your family's about to grow or you might be getting a new job.

Check out these mortgage calculators to figure out how much you can spend on your mortgage payment.

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