Iowa State University Extension

Owning a home is a goal for many families.  Home ownership provides a sense of autonomy and the ability to make creative decisions about your environment; it also holds financial benefits in many cases by reducing taxes and building equity.  Home ownership is not for everyone, however.  Financial stability is needed before making a long-term commitment to mortgage payments and home upkeep; in addition, financial costs may exceed benefits if a home is sold within a short time (less than a few years) after it is purchased. 

If you decide buying a house is the right choice for you, then you need to decide how much you are willing and able to spend on a home.  Several factors enter in, including:

• How much savings can you invest as a down payment?
• How much will a lender loan you?
• How much can you spend each month on home-related payments?
• What are you willing to sacrifice to buy a home?

Begin by working on your current finances.  Keep track of your current spending to find out how much goes for housing, food, recreation, transportation and other categories.  This will help you make sure you can afford to take on the obligations of mortgage payments and other housing-related costs.

Taking a good look at your current spending may also help you find ways to reduce spending so that you can save more for downpayment, moving costs and other costs that may arise with a new home.  It is also wise to work at paying off debts if possible.  Too much debt is one of the factors that can interfere with buying a home, because a lender looks at how large your total debt will be, including the home and also all your other debts.

For more information about the financial aspects of buying a house, see Money Mechanics: Buying a House.  This ISU Extension publication also includes a worksheet to help you estimate how much you can afford to pay for a house.