Can I Afford to Buy?

Usually the first question people ask themselves when considering a home purchase is, "can I afford it?" There are two considerations: the cost of renting versus buying and the level of income to debt you have. When laying out the cost of renting and not gaining any equity on a home versus buying a home, which is one of the best investments one can make, most people will choose to buy.

Financially looking at your income versus how much debt you have can be another matter. Even if you have high debt now, starting to pay off that debt and not incurring new debt can bring you to your dream of homeownership faster.

Get your finances in order.

One of the first steps in getting your finances in order is to look at your credit report. A credit report lists all of your credit cards and other loans, how much of a balance you have on each and your payment history.

If there are any errors on the credit report, you can negotiate with creditors to get them corrected.

If you have high debt, you may want to start a payment plan to reduce your debt before buying a home.

Get pre-approved for a loan.

When shopping for a home, it is helpful to know exactly how much home you can afford. By being pre-approved, your mortgage banker has looked at all the factors that would affect getting a loan on a home – your credit report, income, expenses and current interest rates – to determine the size of the loan you can get. With the pre-approved amount, you can better work with your real estate agent to see homes within your range.

An added benefit to being pre-approved comes when you are ready to put an offer on a house. If the seller is presented two offers – yours and another family, who may not have gotten a pre-approved amount – the seller would likely take your offer. Because you have been pre-approved, the seller knows that the bank will provide you with a loan for the home.