Debt and Home Ownership


Owning real estate is the dream of most Americans and for many it's a status symbol which reflects their success. It is a place where children grow up and where family memories are made. A house is generally the largest investment that a family makes and also represents their single largest expense. If this expense is too great it can cause significant hardship and difficulties begin to emerge. These can include damaged credit increased debt. There are many ways to determine how much you can afford and here are some of those for review:

Lenders will typically approve monthly payments in an amount that equals approximately 30% of your family's monthly gross income. This approval amount is you upper limit and you should try to stay below this level. A budget is a great way to determine what your total monthly expenses will be and what you can afford. In choosing the upper limit for a house, it may mean forgoing other important needs such as vacations, college savings plans or retirement funds.

If the house you want is out of your budget, consider postponing the buy and wait a year or two to accumulate enough money for a larger down payment. This approach may make your dream house now affordable. When selecting a residence, be realistic and determine what aspects of a house are absolutely essential and be prepared to give up those things that are not absolutely necessary as they can generally be added later.

Location, location, location is the buzz word in real estate. Two similar houses with significantly different prices are common, so determine if location is the most important factor. If it is, then the house that you purchase might need to be smaller or have fewer amenities. It is never a wise decision to buy a house that is above your means since making that decision might your jeopardize your financial future. You do not want to damage your credit or incur excessive levels of debt. Be sure that the price you pay fits comfortably in your budget and stick to it.

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