STEP #2 Review Your Finances

Once you have made decision to become a homeowner, you should review your finances and determine how much monthly payment you can afford per month. Begin by analyzing your current monthly expenses. It may be required to cut back on some spending in order to afford a mortgage payment.

How can you know if you are financially ready to become a homeowner? This step guides you through some simple calculations to figure out your current financial situation, and the maximum home price that you should consider.

• How Much Can You Afford?
• How Much are You Spending Now?
• After paying your current monthly expenses (rent, groceries, etc.), do you have any money left over?
• How much are you willing to spend on monthly mortgage payment?
• How much money you have for  a down payment?

Calculate Your all monthly Household Expenses such as groceries, phone, internet, car expenses and misc.  and  Debt Payments such as: credit cards bills, auto loans, student and personal loans. 

Most of the mortgage loan programs require that monthly housing expenses do not exceed 31%  Front End Debt to Ratio and 45% Back End Debt to Ratio of your gross (before tax)  monthly income. Simple way to find out your debt to ratio is  take the total of all monthly debts which are reporting on your credit report and divide over your total Gross Monthly Income.

If your debt to ratios are in order, move forward to the next home buying step.