Buying a home is a major life event.  If you spend too much, you will be on the hook for a sizable investment that has the potential to prove onerous in terms of taxes, monthly mortgage payments, upkeep and so on.  Spend too little and you will live in regret wondering what life would have been like in a nicer home that cost more money.  The key is to take your time, evaluate a number of different options and choose a lovely home you can afford.   



Focus on Your Debt to Income Ratio

The house you have your eye on should not eat up more than 36 percent of your gross income in terms of cost.  If your monthly mortgage payment exceeds this figure, it is a financial liability that could lead to foreclosure or an early sale.  Ideally, your mortgage will account for about 30 percent or less of your gross monthly pay.  So be don’t jump at the opportunity to take out a lengthy mortgage with a massive monthly payment that takes up a large chunk of your gross income.  Opt for something more reasonable to minimize your financial risk and ultimately sleep better at night.



Consider the Costs of Home Ownership

Every house requires some form of maintenance, even if the yard work is outsourced to a contractor.  Annual maintenance, repairs, improvements, replacements and so on will cost money.  So don’t assume your financial obligations end with your mortgage.  You will also have to pay for home maintenance and insurance to boot.  Keep these expenses in mind when setting your financial limitations on homes for sale.  Be sure to add some money to your emergency fund when creating your monthly budget.  Such a fund is necessary to cover the expense of unexpected home maintenance problems, natural disasters and other unforeseen yet costly events. 



Ask for Assistance Through a Pre-qualification

It will help to find out if your current income and debt puts you in a position to qualify for a home mortgage.  The lending institution will evaluate your finances to determine if you qualify for a loan, how much the loan will be for and what sort of interest rate you will have to pay.  Most pre-qualifications account for income and debt yet do not consider your spending habits or goals for personal savings.  Factor in these two variables before making a commitment to a home mortgage. 


If you do not qualify for a mortgage, do not give up hope.  Work on repairing your credit score, paying down your debts and increasing your income.  Continue to improve your credit and you will eventually qualify for a home mortgage, albeit with less than spectacular terms.  If your credit score is holding you back from the mortgage you desire, review your credit report for errs and do your best to save up a sizable down payment to reduce your risk from the perspective of the lending institution.



Plan for the Worst and Hope for the Best

If you are offered a home mortgage loan, do not immediately accept it.  Consider how many payments you could make if you lost your job.  Consider the ongoing costs of home ownership.  If the cost of the mortgage is about one-third or less of your gross monthly income and if you are capable of covering the monthly mortgage payment for at least six months in the event that you are unemployed or sick, you can likely afford the home.  Otherwise, think long and hard before making a financial commitment to a home that has the potential to become  your financial ruin.