Category Archives: Real Estate

What’s Really Included In Closing Costs?

Expect property taxes, homeowners insurance, and lender’s costs to be part of your settlement-day tab.

With your house-hunting and lender searches now in the rearview mirror, you can start steering your way around the final bend that leads to the driveway of your new home: settlement day and closing. A few days before you meet with your real estate agent, a title company representative, and your loan officer for this joyous event, you should have received from the title company a copy of your closing documents. Read these documents carefully — they will include details on the closing costs that are due upon settlement.

  • What are closing costs?

    Closing costs are lender and third-party fees paid at the closing of a real estate transaction, and they can be financed as part of the deal or be paid upfront. They range from 2% to 5% of the purchase price of a home. (For those who buy a $150,000 home, for example, that would amount to between $3,000 and $7,500 in closing fees.) Understanding and educating yourself about these costs before settlement day arrives might help you avoid any headaches at the end of the deal.

  • What’s included in closing costs?

    Closing costs will cover both recurring and nonrecurring fees that are a part of your transaction. Recurring costs are ongoing expenses that you will continue to pay as a homeowner, with a portion due upon closing; nonrecurring fees are one-time fees associated with borrowing money and the services that were required to purchase the property.

    Recurring closing costs are placed in your escrow account, which you might view as a forced savings account for those upcoming home expenses you’ll be facing. They can vary, but the most common ones are property taxes (one to eight months’ worth, depending on when your home purchase coincided with the local tax billing cycle), homeowners insurance (the annual premium is typically due at closing, plus another two or three months’ worth of payments), and prepaid loan interest (for the number of days you’ll have the loan until its first payment is due). Also placed into escrow are costs for title insurance, which is considered a must because it protects you in case the seller doesn’t have full rights and warranties to the title of the property.

    Nonrecurring closing costs are fees paid to your lender and other professionals involved in the transaction. They include: any home inspection fees; any discount points you’re paying upfront to lower your interest rate; an origination fee, which is charged by the lender to process your loan; a document-prep fee, which covers the cost of preparing your loan file for processing; an appraisal fee, which covers the cost of a professional estimating the market value of the home; and a survey fee for verifying the home’s property lines. Also expect as nonrecurring costs: an underwriting fee for the cost of evaluating and verifying your loan application; a credit report fee for pulling your credit scores; title search and recording fees; and a wire-transfer fee for wiring funds from the lender to your escrow account.

  • How to prepare for closing costs

    The best time to study closing costs is when you’re shopping for a lender and can compare your desired loan amount with interest rates you’re offered (plus any discount points you might plan to pay upfront to lower those rates). Then use a closing-cost calculator to determine what your costs might be. The calculator will gauge your monthly mortgage payments, based on whether you’re financing the closing costs into your mortgage or whether you’ve decided to pay them upfront.

Buying a Short Sale: 4 Tips to Make Yours the Winning Offer

Bargain shoppers know that buying a short sale can score you a sweet deal on a home. Since the sellers are set on avoiding foreclosure, buyers can jump in and nab a house below its market value. It might even sound like the easiest transaction ever: The seller is determined to sell a house and you have the means to buy it. It’s good as gold, right? Not necessarily.

Though they might appear simple, short sale transactions are different from traditional home sales. There are a number of pitfalls and extra costs that can arise with a short sale.

What is a short sale and how does it differ from other sales?

Simply put, a short sale is when a home sells for a price that won’t cover the cost of the outstanding mortgage.

Short sales are different from both traditional home sales and foreclosures. In a traditional home sale, you work with only the seller and the seller’s agent to make an offer. In a foreclosure, the lender has already bought the property, so you’ll make an offer directly to the lender, without a buyer involved.

In a short sale, the home is being sold at a loss. So, while the seller still owns the property, the lender must approve any offers.

Below are tips on what to expect and how to have your offer stand out from the crowd.

1. Have your finances sorted

Solid financing always makes an offer appear stronger, but this is especially true in a short sale.

According to Mark Ainley of GC Realty Investments in Chicago, “You can increase your chances of having an offer accepted by either being a cash buyer or having a pre-approval letter from a lender. The pre-approval will carry more weight than a pre-qualification letter because it shows that a lender has already vetted your finances and approved you for that loan amount.”

In addition to the pre-approval, being prepared to put down a sizable earnest money deposit can help move your offer to the top of the pile.

2. Be ready to wait for approval

The approval process is a bit different with short sales. The seller first has to approve your offer, as usual, but then it must be sent to the lender for review before the sale can move forward.

“Be patient. Banks take their time approving a short sale,” advises, Kathryn Bishop, a Keller Williams agent in Los Angeles.

Several individuals, including the lender, will need to look at your offer before a consensus can be reached. The lender must decide how much of a loss it’s willing to take on the loan and it’ll likely vet your finances to make sure you are financially sound enough to buy the home.

This process could take weeks, but in most cases, it will take three to four months.

3. Don’t expect contingencies

In a typical home sale, you can negotiate contingencies with the seller to reduce closing costs, cover fees, or make repairs before you finalize the deal. However, in a short sale, the lender also needs to be taken into consideration, and it is less likely to approve your contingencies.

Keep in mind that the lender is already taking a loss on the loan and won’t want to lower its profits any further.

The lender “is the one making the final decision on whether or not to accept your offer,” says Karen Hanover, a former short sale negotiator with a major lender. “They are going to look at the net after all costs of sale, not just the asking price. They also want to see the properties sold as is.”

4. Don’t navigate a short sale alone

The bank will be trying to recoup as much of its investment as possible, and the seller will be focused on unloading the property before it’s foreclosed. So who has your interest at heart? It’s important to have someone in your corner who can advocate for you and make sure you leave the negotiating table satisfied.

“The buyer must be able to control who does the short sale negotiation and have the legal right to communicate with that negotiator and receive status reports,” says James Tupitza, a real estate lawyer with Tupitza & Associates in West Chester, PA.

Before you even consider making an offer, make sure to bring on a real estate agent—or even legal council—who specializes in this type of transaction.

Post originally found on realtor.com

6 Apartment Upgrades That Landlords Hate (Bye-Bye, Security Deposit)

When you move into a place, it’s normal to want to make it your own, by hanging pictures or even painting an accent wall cherry red. But when you’re renting, you’d best remember: Any changes you make may be reversed by your landlord once you move out and with your money. That’s why renters have to walk a fine line between making themselves feel at home and making changes that will cost them their security deposit.

“If you decide to paint the walls while you are there, you must return them to their original color or the landlord is within their rights to use the deposit to pay for it themselves,” says Trent Zachmann of Renters Warehouse. He explains that many landlords treat modifications or improvements and accidental damages the same when it comes to taking money from your security deposit. “An owner can withhold all or part of the deposit to correct either type of issue,” he says.

But all is not lost: Sometimes modifications can be made with the owner’s approval. Just make sure you’re 100% clear about the stipulations of your lease before you pick up a paintbrush or hammer. Straight from the mouths of landlords, here’s a list of upgrades tenants have attempted that they hate—and will use your security deposit to fix.

1. Painting

This is the No. 1 alteration that landlords complain about.

Annmarie Bhola, a landlord in New York City, understands that for first-time renters especially, there’s an excitement with moving into a new home. And, to many, that means breaking out the paint.

“To feel at home, a fresh coat of personality-defining color is the icing on the cake,” she says. “That’s all cool, but know that if you paint the walls hot pink, it will be coming out of the security deposit! That was one of the most memorable colors I’ve had to repaint.”

Atlanta landlord Bruce Ailion describes creative painting projects as his biggest headache.

“You would think a tenant would pick a neutral color and have a professional paint,” he laments. “Instead they paint purple or black, get paint on the ceiling, on the trim, on the door knobs and outlets. Some will paint around the bed and pictures. It’s a mess.”

2. Hanging pictures

After repainting, filling in holes in drywall is one of the most common issues landlords have to deal with after a tenant moves out.

“Everyone likes to put up pictures, and fortunately new technologies have brought about alternative, less destructive hanging methods, which is great,” says Bhola. So then why don’t more people think to use Command strips instead of nails? “Nine out of 10 times, I always have to fill in the holes and bust out the spare bucket of paint.”

3. Installing window treatments

We know: Those white plastic vertical blinds are so ugly. Your impulse to put up a curtain rod or Roman shades is completely normal. But the holes you have to drill into the wall to mount the window treatments, like those for your pictures, will require patching once you move out. Landlords fume every time they see big screw marks around the window frame.

“Repairing the holes ends up being expensive and time-consuming,” says Zachmann. If you must hang curtains, use large Command hooks that adhere to the wall and don’t leave any stickiness behind.

4. Mounting a TV

What’s worse than hammering nails into the drywall to hang pictures or curtains? Drilling holes in the wall to mount your flat-screen TV.

“The screws have to go directly into the center of studs,” says Brian Davis, director of education at real estate service company SparkRental. “At best, the renter will have screwed 10 to 20 holes into the wall. At worst, the TV will crash to the floor [because it wasn’t mounted correctly], possibly injure someone, shatter the TV, and take a chunk of the wall down with it.” He recommends that renters use a TV stand.

5. Gardening

You would think that planting a few tulips would delight a landlord. But that’s not necessarily the case.

“As a landlord, I want the most maintenance-free rental as possible,” says Atlanta-area property owner and real estate writer Laura Agadoni. “In some cases, I pay for a landscaping service, but I would not want to keep up a garden.”

So, don’t make any changes to the landscaping without the landlord’s written permission. And if you do, don’t be surprised if your security deposit is used to return the yard to its previous state.

6. Updating appliances

If you’re not a fan of that noisy old refrigerator in your rental, it’s perfectly fine to swap it out with a new one of your own so long as you talk it over with your landlord first, and then reconnect the old one after you move out.

“What’s never acceptable is swapping out an appliance, throwing the old one away, and then taking the new one with you when you move out, leaving a gaping hole where there was once an appliance,” says Davis.

So if there’s something you’d like to update, just ask your landlord about it first. You never know.

“What some landlords will allow may be different than what other landlords allow,” says New York City broker Eric D. Rosen. “In some cases, it might even be possible that a landlord will share the cost.”

Article originally found on realtor.com

3 Common Moving Nightmares (and How to Prevent Them)

There’s no other way to put it: Moving is stressful. But it doesn’t have to be a waking nightmare. Here’s how to avoid a move from … you know where.

Nightmares aren’t supposed to take place in broad daylight, but some common life events bring so much tension, uncertainty and anxiety that they can easily rank as “quality nightmares.” Moving house tops the list of stressful experiences that can feel like a bad dream — and it can easily come true unless you take precautionary measures.

Problems can occur at every stage of the relocation process: A violent storm hits just when the moving truck is parking in front of your door. The elevator is out of order when you arrive at your new high-rise building. You lose the keys to your car on the morning of moving day. The list goes on.

However, the most common moving nightmares fall into three main categories. Here’s how they typically play out — and how to avoid them.

Bad movers

Many moving horror stories involve rogue or incompetent movers.

  • The movers are late or don’t show up at all. The agreed-upon time comes and goes, but you see no sign of an approaching moving truck. When you call the moving company to demand an explanation, your relocation nightmare begins. Regardless of the excuses you receive (a traffic jam, a breakdown, a delay on a previous job, a mistaken date, etc.), the inevitable result will be lots of stress and wasted time. Worst of all, you may not be able to reach the moving company at all: fraudulent movers may have taken your deposit money and disappeared with it.
  • The movers are careless or inexperienced. If your movers arrive late, in a smaller moving truck than needed, or lack the required know-how and the proper equipment to handle your items safely and efficiently, your relocation can quickly turn into a nightmarish experience. The amateur movers may drop your plasma TV, break your heirloom china, scratch your antique dresser, dent the floors, or cause other overwhelming emotional and financial damage.
  • The movers are scam artists. In the worst case scenario, you may fall victim to unscrupulous moving scams. Rogue movers will often request much more money than previously negotiated based on some alleged extra services. They may hold your belongings hostage until you pay a considerable extra “fee” as ransom, or steal your more expensive belongings and just discard the rest.

The good news is that there is an easy way to avoid such nightmares. All you need to do is carefully research your movers before hiring them to make sure you are dealing with licensed and experienced professionals you can trust. It’s also a good idea to purchase appropriate insurance for your belongings, just in case.

Traffic problems

Heavy traffic or road accidents can also turn your move into a real nightmare.

  • Traffic jams. The moving truck is delayed and there may not be enough time to proceed with your move as planned. You may have to postpone the relocation to another day, or you may miss your flight.
  • Traffic accidents. if there has been an accident on the road, the moving truck will have to wait until the damaged vehicles are removed and normal traffic is restored. However, the scenario could get much worse: You may lose all your possessions or receive them badly damaged if the moving truck crashes, catches fire, or gets trapped somewhere because of adverse weather conditions like heavy snowfall or torrential rains. It’s even possible that thieves could break into the vehicle and steal your goods.
  • Breakdown. If the moving truck breaks down on the road, you’ll have to wait for the moving company to send another vehicle. What’s more, your items can easily get damaged while being transferred.
  • Parking issues. The moving truck has to circle the neighborhood for hours until an appropriate parking space is vacated, or the movers have to park far away from the entrance to your home. In such cases, you’ll not only lose valuable time, but will also have to pay an extra fee for the delay or an additional long-carry fee.

Of course, there’s nothing you can do to prevent traffic accidents or breakdowns. But you can at least reserve a parking place directly in front of your old and new homes, and choose a moving company that has experienced drivers and several moving vehicles in good condition.

Poor organization

The only way to avoid problems when moving house is to plan each phase of your relocation adventure in meticulous detail and stay one step ahead all the time. Otherwise, you may find yourself facing any of the following all-too-common moving ordeals.

  • Packing chaos. It may turn out that you’ve packed more items than previously discussed with the movers; packed items that can’t be loaded onto the moving truck; haven’t labeled the boxes properly; or forgotten to prepare an “essentials box.” Worst of all, you may not be ready when the movers arrive. All these packing mistakes will result in lost time and money.
  • Furniture troubles. If your large furniture doesn’t fit through the doors, you may be forced to leave some treasured pieces behind, or request hoisting services that will cost you dearly and will delay your move considerably.
  • Paperwork problems. If you forget to transfer the utilities, you won’t have electricity, gas, and water on move-in day. If you forget to change your address, you won’t have your mail delivered to your new home. If you forget to update your driver’s license and car registration in time, you’ll be fined. Not taking proper care of your documents will most certainly get you in trouble.
  • Overspending. If you book your movers at the last moment, require too many extra services, fail to create a realistic moving budget, pack all your items without sorting them out first, or allow any other financial imprudence, you’ll end up paying much more than you expected.
  • Safety issues. Make every effort to prevent injuries and accidents on moving day, as getting hurt is one of the worst things that can happen during your relocation endeavor.

Post courtesy of zillow.com

Homeownership 101: Are You Ready?

Owning your own home is part of the American dream. But it takes more than just dreaming of buying and maintaining a home. Before you take the plunge, here are some things to ask yourself.

Does it make sense to buy?

Buying instead of renting needs to make sense financially. To help you decide, play with Zillow’s Buy vs. Rent calculator to see how many years it will take before the cost of buying equals the cost of renting. It’s called the breakeven horizon, and it varies by area of the country.

If you plan to stay in your home past your breakeven horizon, then buying makes financial sense. If you think you’ll move earlier, then renting may be the way to go.

Are you financially ready?

Buying a house involves raising a down payment and paying a monthly mortgage, which lasts anywhere from 5 to 30 years, depending on the home loan you can afford and are offered. There are other costs as well, but let’s focus on the big money.

Down payment: It’s the lump sum you’ll pay upfront that funds equity in the property and proves to lenders that you’ve got skin in this homeowner game. Down payments vary. In the go-go days that led up to the housing collapse, some lenders dismissed the down payment altogether – and we see how well that ended. Today, 20 percent is preferred and often gets you the best rates, but some loans allow down payments as low as 3 percent. Sometimes parents or friends can offer help with the down payment. If you have a choice, take a gift rather than a loan, not only for obvious reasons, but because lenders will add that debt to other monthly obligations and potential mortgage payments to determine your debt-to-income ratio, which generally can’t top 43 percent to qualify for a home loan.

Monthly mortgage payments: This is what you’ll pay each month. In most cases, a mortgage includes the loan principal and interest (both amortized over the life of the loan) plus homeowners insurance and property taxes (pro-rated). When credit was tight, getting a mortgage at any rate was reserved for only the most credit-worthy borrowers. Things have loosened, but lenders still want to know that you’re a responsible, gainfully employed and credit-worthy candidate.

Are you emotionally ready?

Owning a home is a huge commitment so before jumping in, consider if you are ready to make lots of decisions, from picking an agent to picking paint colors. Are you confident enough to select a neighborhood where you’ll want to stay for a while? And are you up for devoting the time and attention to maintaining a home? Weekends will disappear under chores like pulling weeds, cleaning gutters, shoveling snow, sealing counters and decks, and on and on. Taking care of your biggest investment can be gratifying but only if you’re ready.

Do you have the skills?

Your home will require regular maintenance and repair, and there’s no landlord to call for help. You’ll need some basic handyperson skills so you won’t go broke hiring a repair professional to remedy every odd sound or smell. Here are some things every homeowner should learn how to do:
• Change a toilet flapper
• Shut off the main water valve and outdoor faucets
• Change a furnace filter
• Clean gutters of debris
• Change smoke detector batteries
• Locate and flip breaker switches
• Locate studs to hang shelves
• Paint a room

Post courtesy of zillow.com

Some Helpful Tips For Investing In Real Estate Using Retirement Funds

Most people mistakenly believe that their retirement accounts must be invested in traditional financial related investments such as stocks, mutual funds, exchange traded funds, etc. Few Investors realize that the Internal Revenue Service (“IRS”) permits retirement accounts, such as an IRA or 401(k) plan, to invest in real estate and other alternative types of investments.  In fact, IRS rules permit one to invest retirement funds in almost any type of investment, aside generally from any investment involving a disqualified person, collectibles and life insurance.

One of the primary advantages of purchasing real estate with retirement funds is that all gains are tax-deferred until a distribution is made or tax-free in the case of a Roth account (after-tax). For example, if one purchased a piece of property with retirement funds for $100,000 and later sold the property for $300,000, the $200,000 of gain appreciation would generally be tax-deferred. Whereas, if you purchased the property using personal funds (non-retirement funds), the gain would be subject to federal income tax and in most cases state income tax.

The two most common vehicles for purchasing real estate with retirement funds is the self-directed IRA or an employer sponsored 401(k) plan.  However, most employer 401(k) plans do not offer real estate as a plan investment option and, thus, the self-directed IRA has become the most popular way to buy real estate with retirement funds.  Establishing a self-directed IRA is quick and relatively inexpensive and can be done in just a few days.  The most challenging aspect of investing in real estate using retirement funds is navigating the IRS prohibited transaction rules.  In general, pursuant to Internal Revenue Code (“IRC”) Section 4975, the retirement account holder cannot make a retirement account investment that will directly or indirectly benefit ones self or any disqualified person (lineal descendant of the retirement account holder and related entities), perform any service in connection with the retirement account investment, guarantee any retirement account loan, extend any credit to or from the retirement account, or enter into any transaction with the retirement account that would present a conflict of interest.  The purpose of these rules is to encourage the use of retirement account for accumulation of retirement savings and to prohibit those in control of the retirement account from taking advantage of the tax benefits for their personal account.

Aside from navigating the IRS prohibited transaction rules, the following are a handful of helpful tips for making real estate investment using retirement funds:

  • The deposit and purchase price for the real estate property should be paid using retirement account funds and not from any disqualified person(s)
  • All expenses, repairs and taxes incurred in connection with the retirement account real estate investment should be paid using retirement funds – no personal funds from any disqualified person should be used
  • If additional funds are required for improvements or other matters involving the retirement account-owned real estate investment, all funds should come from the retirement account or from a non-“disqualified person”
  • Partnering with yourself or another disqualified person in connection with a retirement account investment could trigger the IRS prohibited transaction rules.
  • If financing is needed for a real estate transaction, only nonrecourse financing should be used. A nonrecourse loan is a loan that is not personally guaranteed by the retirement account holder or any disqualified person and whereby the lender’s only recourse is against the property and not against the borrower.
  • If using a nonrecourse loan to purchase real estate with a self-directed IRA, the unrelated business taxable income (“UBTI”) rules could be triggered and a tax rate reaching as high as 40 percent could apply.  Note – an exemption from this tax is available for 401(k) plans pursuant to IRC 514(c)(9). If the UBTI tax is triggered and tax is due, IRS Form 990-T must be timely filed.
  • No services should be performed by the retirement account holder or any “disqualified person” in connection with the real estate investment.  Please see: Finally Some Clarity On What You Can And Cannot Do In Your Self-Directed IRA for additional information
  • Title of the real estate purchased should be in the name of the retirement account. For example, if Joe Smith established a Self-Directed IRA LLC and named the LLC “XYZ, LLC”, title to the real estate purchased by Joe’s Self-Directed IRA LLC would be as follows: XYZ LLC.  Whereas, if Joe Smith established a self-directed IRA with ABC IRA Trust Company (custodian), and the custodian purchased the real estate directly on behalf of Joe without the use of an LLC, then title would read:  ABC IRA Trust Company FBO John Doe IRA.
  • Keep good records of income and expenses generated by the retirement account owned real estate investment
  • All income, gains or losses from the retirement account real estate investment should be allocated to the retirement account owner of the investment
  • Make sure you perform adequate diligence on the property you will be purchasing especially if it is in a state you do not live in.
  • Beware of fraud if purchasing real estate from a promoter.
  • If using a self-directed IRA LLC to buy real estate, it is good practice to form the LLC in the state where the real estate will be located to avoid any additional filing fees.  Also, be mindful of any annual state LLC filing or franchise fees.

Using retirement funds to buy real estate can offer retirement account holders a number of positive financial and tax benefits, such as a way to invest in what one knows and understands, investment diversification, inflation protection, and the ability to generate tax-deferred or tax-free (in the case of a Roth) income or gains. The list of helpful tips outlined above should provide retirement account investors looking to buy real estate with a guideline of how to keep their retirement account from running afoul of any of the IRS rules.  However, retirement account holders using retirement funds to invest in real estate must be mindful of the broad application of the IRS prohibited transaction and UBTI rules and should consult with a tax professional for further guidance.

Post courtesy of Forbes.

How Much House Can You Really Afford?

Just because a lender approves you for a mortgage doesn’t mean you can comfortably afford it.

If you ask Google “how much house can I afford,” you’ll find a number of online tools and mortgage calculators to help you find a fast answer. You might also find quick but somewhat confusing advice like “your mortgage payment shouldn’t take up more than 35% of your monthly income.”

Quick. Do you know what 35% of your monthly income is? If not, you’re not alone. While online housing tools are a helpful starting point for the early stages of your house hunt, it’s important that you understand how the pieces all fit together, and that you take your personal financial situation into account.

Why a calculator can’t tell you how much house you can afford

  1. 1. Financial rules of thumb may not apply to you

    While 35% seems like a straightforward figure, your financial picture is a lot more complicated than that number would make things seem. Your ideal monthly housing costs could vary depending on things such as debt and other monthly payment obligations — not to mention how much you’ve saved for a down payment.

    If you have high credit scores and a clean financial background, a mortgage calculator can be a great starting point for mortgage shopping. You’ll get a much better sense of what your price range might be instead of a blanket rule of thumb. But they’re only as accurate as the information you provide, so if you forget to add regular budget line items such as food, day care, or gas costs, you won’t get a complete picture.

  2. 2. Your lender may approve you for more than you can realistically afford

    Lenders are now legally required to ensure borrowers can “reasonably afford” to repay a loan before they approve a new mortgage. But there’s a difference between being able to reasonably afford something and being able to realistically afford something.

    When looking at what’s reasonable, lenders account for your income and any current debts that you need to repay each month. If you make $5,000 per month after taxes and need to pay $500 toward your car loan each month, a mortgage payment of $1,500 may seem perfectly reasonable.

    In this (extremely simplified) example, you’d have about $3,000 per month left over to handle all your other expenses. And perhaps you can afford your living expenses on this budget.

    But what about the other goals you want to achieve? What about saving for retirement or investing for your future?

    If you commit to a large monthly mortgage payment, you may find yourself squeezed to make your remaining money cover your living expenses, plus monthly bills and loan repayments. While a lender can give you a mortgage you can reasonably afford, it could mean not being able to handle other financial priorities.

  3. 3. You’re the only one who can determine what’s comfortable

    Only you can examine your life and values to determine what you are willing to spend on your mortgage budget — and what you’re not.

    You might be perfectly happy to take on a larger monthly mortgage payment in exchange for reducing meals out, cutting back on vacations, or sticking with your old phone instead of going for the upgrades just because you can. Or you may decide that renting makes more sense for you because you can mitigate costs, take on less financial responsibility, and enjoy more flexibility.

    Either way, you need to determine what you feel comfortable with. You need to decide what works within both your budget and your long-term plans to reach goals that matter to you.

  4. 4. Ask yourself these questions to decide how much house you can really afford

    Once you set your financial priorities, here’s where you’ll need to do the math:

    • What’s my current income? What are my basic living expenses? What are my fixed costs?
    • How much do I want to put away each month into savings or investments?
    • How much will it cost to maintain my new home?
    • What kind of down payment do I have? (The more you put down, the smaller your monthly mortgage payment will be.)

    Now you can factor a mortgage into all of the above, and see how much you can really afford. When doing so, don’t forget to count both the mortgage principal and interest — along with property taxes, homeowners’ insurance, and other extras such as HOA fees.

Post courtesy of trulia.com