When looking for a new home we get carried away looking at the amount of space, the architecture, the fixtures and other details, the landscaping, and the list goes on. We pay so much attention to the looks of the house that we forget to look at what we will actually pay for the house. Yes, we look at the actual cost of the house, but we rarely convert that into what the reality of that particular mortgage payment would be.
If you are looking at a particular house, or a particular price range of homes, try this experiment to see if you can realistically handle the mortgage for that price house:
Go to http://www.zillow.com/mortgage-calculator/ (this particular calculator includes taxes and PMI insurance, which gives a more accurate number) and enter the price of the home you are considering. Calculate what your monthly mortgage payments would be.
For several months put this amount of money aside to see if you can manage the payments comfortably. If you are currently paying rent or a mortgage, set aside any difference in your current mortgage and your “goal” house.
The point of this exercise is to see if you are being realistic about your income and what you can really afford. If you determine the mortgage amount is one you can live with, you can confidently take steps toward a purchase. If not, you may need to set your sights on a lower priced house, or alternately try to adjust your other expenditures. Either way, this experiment will give you a better idea of your ability to pay for the house comfortably.