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Before you ever begin actually shopping for the home of your dreams, you owe it to both your present and future selves to administer an immediate reality check and become uncompromisingly realistic about affordable mortgage terms.
Without a solid, conservative range in mind, your chosen realtor cannot narrow any given housing market's inventory down to listings that work with both your established needs and a reasonable price spectrum. That means wasting your time, your agent's time and probably that of numerous sellers' representatives by scheduling showings for properties you could never legitimately afford in the first place. Meanwhile, let's assume a lender actually approves you for a mortgage with terms you don't immediately realize are beyond your means. This is something you definitely want to avoid as it could lead to payments that you won’t be able to keep up with.
That’s why it’s essential to approach these types of decisions prepared. Scores of qualified, experienced mortgage consultants, like those at Premium Mortgage Corp, will gladly sit down to discuss your present resources and guide you down a road that leads far from the tragedies of being "house-poor" in America. However, it pays to start on the right foot with early research.

Your Budget

Older rules of real estate are not always the wisest to follow. You could certainly abide by the classic adage most people can "afford" a home that costs two to three times one's gross income. Assuming you pull in $100,000 annually, that draws your price range somewhere between $200,000 and $300,000. Simple, right?


Wrong. That rule of thumb fails to take monthly expenses and debt into account, both of which exert tremendous influence on real affordability. In fact, it basically assumes no debt whatsoever. It's a whole different ballgame for someone paying $1,000 or more each month to cover car loans, student debt and credit card balances. Instead, tally your regular monthly expenses from essentials to incidentals, including savings.
Now, add up likely homeownership costs such as property taxes, insurance, utilities, maintenance, any community association fees and, of course, your ideal mortgage payment.
Lastly, calculate three times your gross annual income. How do the numbers stack up?

Your Down Payment

Yes, conventional wisdom dictates that a 20-percent down payment is the bare minimum needed to not only establish a realistic offer on a home and qualify for a mortgage but avoid requiring hundreds of dollars’ worth of private mortgage insurance payments every month to cover the lender's bases in the event you default. That's the status quo, but don't settle for it if you don't have to.
Laying out the lowest reasonable down payment might as well be the same as accepting the largest possible mortgage for which you qualify and the highest of monthly payments. Paying more now means paying less each month throughout your mortgage, but don't take this strategy to a dangerous extreme. Conversely, that could mean paying vastly more for your home than you have to if home prices and/or interest rates should skyrocket while you continue squirreling away an ever-larger sum to pay up front.

Your Debt

This is the one factor nobody actually wants to examine that closely. Honestly discussing personal debt makes many people instantly self-conscious and evasive. It's an immensely sensitive subject, but an irrefutable majority of lenders will not extend a mortgage offer to a prospective borrower whose sum of current monthly bills and project monthly loan payments covering home loan principal, taxes, interest and insurance exceeds 43 percent of household gross annual income.
Finally, a word of advice: crunch those numbers like walnuts. A few seconds' scavenging on Google will turn up numerous mortgage-calculation tools through which you can run any set of numbers you choose to devise a proportionate estimate of your ideal affordable mortgage.
Good luck, happy hunting, and in the words of preeminent personal-finance guru Dave Ramsey, "Act your wage."

Author's Bio: 

Emma is a freelance writer currently living in Boston, MA. She writes most often on education and business. To see more from Emma, say hi on Twitter @EmmaSturgis2