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Understanding The Math Behind Home Ownership

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Own A Home Now With Down Payment Assistance

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"Save money for your mortgage down payment by reading our money saving tips and articles."

First House Down Payment
©iStockphoto.com – onurdongel

Unlike when our parents bought their first home, we're very fortunate to have some tools available to us that were not available even 5 or 10 years ago. Today, we are able to go online and use the internet to search for new homes, new construction and even land to build a home. When you're getting ready to start looking for your new home and are in the process of saving up your down payment, you will want to leverage the internet to research the specifics of home loans and the home purchase process. This will be the first in a series of articles about using the internet to research your first home and the fundamentals of the home purchase and home loan process. While these articles are not directly related to saving money towards you home mortgage down payment, there is no better time than now (while you are saving for your house) to understand all of the details!

My First House - How Much Can I Afford?

One of the first decisions you're going to need to make is how much home you can afford. Fortunately, there's no real mystery to this, there are hundreds of resources available to you that can help you find out approximately how much home you can buy and still live within your budget.

Try Out Online Home Loan Calculators

Since you already know what your average income is on a weekly, monthly, and annual basis, this will be your first calculation that you need. The next step is to determine what lenders agree that your maximum mortgage payment should be (including your taxes and insurance). There are many home loan calculators that are available to you online that you can use for this purpose, though the most generally accepted calculators are through Fannie Mae and Ginnie Mae which provides a calculator with very specific questions and will ultimately tell you how much you can afford to spend on your 1st home.

One of the advantages of beginning your research this way is that you'll be able to find out exactly what the cost range of a home you can look at which will set you on the path to finding the home of your dreams at a price that is guaranteed to work into your budget. You will always want to look at homes within your price range. Remember, home ownership is great, but it won't be as much fun if you are not living comfortably. Buy within your means and you will achieve financial freedom and set yourself up for long term success.

Mortgage calculators will give you information that includes loan types, down payment amounts, loan rates and terms, estimated mortgage payments, additional housing payments and will give you a clear picture of how much "other" money you'll have to spend in a month after your mortgage payments are made. It is important that you keep in mind when using these mortgage calculators that they often do not include information on mortgage insurance (required for loans over certain amounts and decreases over the life of the loan), property taxes and property insurance.

Calculating My Down Payment Amount

Taking this first step will allow you to also determine the amount of your down payment for your new home. There's not a lot of mystery in a home purchase, the more money you put down means the less your monthly payments are going to be. If you carefully do your research to how much you can spend for the total cost of the home then you'll wind up being able to set your savings goals for your down payment. Saving up a large down payment and putting down a little extra is an excellent way to improve your overall financial situation and set yourself up for long term financial success. In fact, this is the overall charter and premise of this site and a point we feel strongly about at Save For House.

Remember that the cost of your home will also need to deal with closing costs, and we'll talk about that more in our next article in our series - understanding closing costs - what they are and how they impact your 1st home mortgage.

This article is written by guest author Doreen Martel exclusively for Save For House.

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