4/23/2012 - How to determine whether homeownership is an affordable option
With the home buying season underway, M&I - a subsidiary of BMO Financial Group - is supplying first-time homeowners with financial tips they should keep in mind when shopping for a new property.
Sheila Blom, market manager for M&I's Florida division, said one of the most important things is knowing how much people can actually afford.
"The first step is figuring out how much you can afford to spend on homeownership, which means an honest assessment of the household balance sheet," said Blom. "Once you have a clear idea of where you stand financially, you can then make a responsible decision of what you can afford, including your down payment, monthly mortgage costs and other expenses like utility costs, property insurance and taxes."
She added that consumers should keep a few basic rules in mind when gauging their overall costs, suggesting that housing expenses should not occupy more than one-third of one's income. In addition, paying back debts should not take up more than 40% of one's earnings. If these two rules of thumb are satisfied, homeownership is a worthwhile consideration.