Wednesday, May 14, 2003

How much house can you really afford?

It pays to know a few general mortgage guidelines

If you're shopping for a home, you can save yourself a lot of wheel-spinning by taking a minute to figure out how much mortgage you can afford.

Of course, a great deal depends upon interest rates, which some say are currently at their lowest in 40 years but could go back up at any time, according to experts. But some guidelines are fairly standard.

One way to find out how much you can afford is by calculating how high your monthly payment can go. Generally, a lender will want your monthly mortgage payment to total no more than 29 percent of your monthly gross income before taxes and other deductions are taken out according to the U.S. Department of Housing and Urban Development's Web site (www.hud.gov). From there, obviously, the lower the interest rate, the more expensive the home you will be able to afford.

HUD has a considerable amount of information on its Web site about buying a home. You can download a small booklet entitled "Looking for the Best Mortgage: Shop, Compare, Negotiate." It has information about what various mortgage-related terms mean, what to ask prospective lenders, and more.

You'll want to compare all of the costs involved in obtaining a mortgage. Shopping, comparing and negotiating may save you thousands of dollars.

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