House Rules for Buying Smart
1. Budget wisely. If you pay $1,200 a month in rent, that doesn't mean you can handle a $1,200 monthly mortgage. On top of the base cost, you'll have to cover property tax, home insurance, utilities, and repairs. Plan on adding about 40 %to your base cost. If your mortgage is $1,200 add $480 to get a better estimate.
2. Play house. Spend 6 months depositing into a savings account the difference between what you spend on rent and what it will cost to own. For example, if your target total cost if $1,600 and your rent is $1,200 put away $400 a month. After 6 months, if you've been able to keep up the deposits and pay your other bills, that's a sign you can afford to buy. Put your savings toward the down payment.
Posted by Pauline Relkey
on January 26, 2010