Are You Practicing for Your Mortgage Payment?
Image by TheTruthAbout via Flickr
Many people do not realize the dramatic change in housing costs that a mortgage can result in. Indeed, for many people, a mortgage payment costs more than rent. And that’s before you add in taxes, insurance, possible HOA fees, maintenance and utilities. (Realize that when you buy a home, with more square footage, you will have more of it to heat and cool.) It might come as a surprise to you that you are suddenly paying double or triple what you were each month when you rented. This means that buying a home requires preparation — and for more than just getting approved for your mortgage. You need to make sure you are comfortable with the costs of home ownership.
Practicing to pay your new housing costs
Jim Wang at Bargaineering has a great idea: Practice paying your housing expenses before you buy. Figure up how much a mortgage would be (use an online mortgage calculator) and add in how much you would pay in taxes and insurance and other fees. This information can be estimated by speaking to a mortgage broker, or by checking into your local rates. You can also add in rough estimates for utilities and maintenance. Add all of that together. Subtract what you already pay for housing from that total. The result is the difference between what you pay now, and what you are likely to pay for housing after getting a mortgage.
Before I bought a home, I was paying $700 a month in rent, plus $90 in utilities for $790. My new mortgage plus taxes is $1350 per month. We spend about $30 a month on maintenance, $45 a month on home insurance and $120 a month for utilties. Our housing expenses are $1,545 per month. Subtract out the $790, and we are paying $755 more per month after buying our house.
Instead of spending $755, it goes into a savings account while still renting. That way, you have an idea of whether or not you can handle the extra costs. You should try living on this new budget for at least six months. Meanwhile, you can use the money that you are saving up to cover closing costs, augment your down payment or purchase items for your new home.
Only if you are sure you can afford the new costs associated with your home should you buy.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=dd68b8dc-0901-477a-9f69-ee715c95714f)
July 15th, 2009 at 10:43 am
[…] the possible costs, and consider the expenses that come with home ownership. You might try to practice living on your new budget before committing to a home mortgage loan when you may not be able to afford the total costs of […]
July 21st, 2009 at 12:39 pm
[…] able to get a good deal, if you can’t actually make the mortgage payment long term (you can practice making your mortgage payment), then you could end up in […]
July 28th, 2009 at 2:20 pm
[…] Are You Practicing for Your Mortgage Payment? Image by TheTruthAbout via Flickr Many people do not realize the dramatic change in housing costs that a mortgage can result in. Indeed, for many people, a mortgage payment costs more than rent. And that’s before you add in taxes, insurance, possible HOA fees, maintenance and utilities. (Realize that when you buy a home, with more […] […]
July 30th, 2009 at 10:22 am
[…] payment may be more than you are used to paying in rent. This means that it is a good idea to to practice making a mortgage payment before you […]