Reply to How much house can we afford?

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[quote=Anonymous]Agree with PP.  Look at your current finances, compute approximately what you want to spend per month.  Then go out and price mortgages (e.g. find out how much a bank is willing to loan you, and on what terms, i.e. what interest rate, how many points, etc).  If you aren't sure how to shop for mortgages, then one easy way to start is going to a company like lendingtree.com and putting in your info.  You'll get between 3-6 "bids" from various banks with mortgage offers.  You are not obligated to use any of them (although you do get spammed by them as a result).  But this will give you an idea of what types of offers you'll have.  Take the rates and compare on the tables on this page:

[url]http://www.ifitbreaks.com/afford.htm[/url]

for 30 year mortgages, which is likely what you'd want for your first purchase, unless you are borrowing a lot less in which case you might want to evaluate 15 year mortages.  I don't have an easy table, but you can use regular mortgage calculators to determine based on the amount you want to borrow, and the rates that you are quoted to determine what the monthly payments would be.  Anyway, from the table, you'll be able to get a ballpark of how much you're willing to borrow to keep your payment to the amount you can afford.

Oh one more thing.  One thing that the table above does NOT include is taxes and insurance.  That is localized and you have to find out what the local taxes are.  Most mortgage lenders nowadays will escrow the money for your taxes and insurance in order to guarantee that those get paid.  If that's the case, add up the amount that you would pay for both and divide by 12 and you'll get an approximation of what the mortgage lender will charge you each month.  That money will get paid into an escrow account and when it comes time to pay insurance or taxes, the mortgage lender will pay it from the escrow funds.  Once per year, the mortgage lender will reevaluate your taxes and insurance payments and may raise or lower your monthly escrow fee to compensate (if you were paying too much, they sometimes mail you back a check for the overage before lowering the rate).  But, the escrow amount has to be included in your computation of what you can afford.
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