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Before contacting a realtor and begin looking at homes for sale, there
are a few things you need to do. Your realtor will assist you in
discovering how much home price you can afford, but he/she needs
information from you to do it. So, go prepared with your financial data
to your first appointment with your realtor in order to begin looking
at homes for sale immediately.
To determine a homes for sale price that you can afford, you need to
review your financial situation to determine how much down payment you
can afford and how large of a monthly payment you can comfortably
handle.
Net Worth
So, before looking at homes for sale, put together a statement of your
net worth. Begin by doing an inventory of all your assets (what you own
that may be sold for cash). This includes all investments, savings
accounts, household furnishings, your current home and any other real
estate, vehicles, recreational vehicles and equipment, furs and
jewelry, guns, electronic equipment, loans owed to you, any vested
equity you own, cash and surrender values of insurance policies,
collectibles, and precious metals and gems.
Now, list the value of each item. This is the amount you believe you
could sell the item for cash within a reasonable timeframe. Deduct any
money owed on the item from the sell price. For example, you might be
able to sell your current home for $150,000, but you owe the mortgage
company $75,000 (pay-off amount) and another $3,000 in property taxes
that would come due before it could be sold.
Now, list all of your liabilities. They are anyone to whom you owe
money for whatever reason. They include mortgages, loans and credit
lines of any types (including credit cards), and even your Uncle Bob
that loaned you $2,000 last summer.
Total your assets and liabilities. Then, subtract the liabilities from your assets to determine your net worth.
Down Payment
To determine your possible down payment for a homes for sale, take your
net worth and subtract out the following: Savings for emergencies,
education and retirement; settlement and moving costs of buying the
homes for sale; and cash you will need to improve, decorate and furnish
the new homes for sale. The remaining is your possible down payment.
Monthly Payment
Next, calculate the possible monthly payment you can afford for your
homes for sale. List all of your actual and projected monthly expenses.
Include all the monthly costs of your liabilities listed above, adding
the following items: Insurance premiums, all household expenses
(including cell phones and DSL costs), any taxes owed but not already
withheld by your employer, all transportation costs (include
maintenance, fuel, and licensing), clothing costs (new and
maintenance), pocket money for family members, groceries, personal
care, recreation and entertainment, medical and dental costs, charity,
special expenses (such as tuition), and miscellaneous costs. Divide
into monthly costs any expenses paid quarterly or annually.
Now, total your monthly expenses. Subtract out your monthly mortgage or
rent. Subtract the remaining expenses from your total monthly household
income. This is the amount you can comfortably pay for a monthly
mortgage payment on a homes for sale.
If the monthly payment for a homes for sale seems a bit low, review all
of your monthly expenses. Where can you decrease or eliminate
expenditures? For example, paying off your high-interest credit cards
to eliminate the high monthly payments.
Once you have this information in hand, your realtor can determine just what you can afford to pay for a homes for sale. |