Contrary to popular belief, the affordability of the home is not only based on the monthly mortgage payment. Other aspects include:

• Condo fees or homeowner associated fees that are associated with the property,
• Taxes that are associated with the property,
• Heating and Utility costs of the property,
• Any costs that are associated with repairing or renovating the property.

So, when taking into account the income, the mortgage payment should be combined with these ongoing payments to determine how much you can truly afford for your first home. As a guideline, experts recommend spending a maximum of twenty five to thirty percent of the income on the costs which are associated with housing.

Lenders take these factors into account when determining how much the applicant will receive for the preapproval amounts. These numbers can be adjusted depending on the term of your loan. For example, a shorter loan term can mean monthly higher payments, whereas a longer home loan term creates lower monthly payments.

There are certain ways which you can increase the amount that you have been approved for. This includes using a cosigner such as a spouse, partner or family member whose income and employment and credit history will also be evaluated and can increase the amount of the approval by up to eighty percent. This is a great way to maximize the home buying potential.

Spending more than thirty percent of the income on housing payments can lead to stress being placed on other aspects of the finances. In order to avoid financial mistakes, spend within your means and realistically determine the amount that you can afford each month to spend on housing.

In the eyes of most buyers, purchasing a home is thought to be less expensive than renting a home each month. Although, the costs that are associated with home ownership can be quite a bit more expensive than the monthly payment to the landlord.

Remember that an emergency home fund should be started upon transferring of ownership of the home to the new buyers. This fund will cover any repairs or renovations that must be completed in the home. How much should you be saving? The homeowner should be saving at least five percent of the income to contribute to the fund. Three percent of the value of the home should be saved in this emergency fund – just in case repairs are required such as a new roof, water or electrical emergencies and even renovations required to maintain the value of the home.

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