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Knowing What You Can Afford

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					                           Home Inspections & Warranties Guide


A home inspection carried out by a professional inspector is an absolute necessity before you
buy a property. A home inspection can tell you whether the home needs any repairs and can tell
you what condition the property is in. If there are any safety concerns or any problems that can
devalue the home, a professional inspector will let you know before you buy the property. If the
home does need repairs, an inspector can let you know some of the costs associated with the
projects.

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A home inspection ultimately lets you understand the property you are buying. It is important
to remember that homes come with little to no warranty. Even the low-cost appliances you buy
at a store at least ensure that for a year or so you can return your purchase if you notice a
problem. With homes, however, if you notice an expensive problem after you buy, you have no
recourse but to take care of it on your own dollar. Home inspections ensure that there are no
such unpleasant surprises.

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Home warranties are another way to protect yourself when you buy a property. These
warranties cover the costs of repairs related to your plumbing system, heating and air
conditioning systems and major appliances. In essence, warranties cover the costs that
insurance will not cover. If you are buying a home on a budget, home warranties can protect
you from unexpected expenses. Repairs to heating, plumbing, and major appliances can cost a
great deal of money and wreak havoc with your budget. With warranties - which generally last
about a year - you do not have to worry. Any new problems that crop up - existing problems are
not covered - are paid for. Home warranties usually cost a few hundred dollars a year and each
service call costs under $50, usually. If you have a new construction home or a newer home in
good shape, you might decide you do not need or want a home warranty. With older homes,
though, it is often a good idea since problems can crop up unexpectedly.

				
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Description: If you want to purchase a property, one decision you will have to make up front is how much you can spend on real estate. While lenders may promise that you can have your dream home, you need to budget carefully so that you do not end up living paycheck to paycheck - or worse. When deciding how much you can afford, consider: 1) How much you can afford as a down payment. Consider any savings you have as well as loans you can get and assets you can sell. Traditionally, you should put down 20% of the asking price of your home. Therefore, if you can afford to put down $25 000 in a down payment, you can look at homes up to $250 000. 2) Your ideal homes. Look at the asking price of homes you are interested in buying and multiply that price by 0.80. This will give you a general idea of the mortgage debt for these homes. 3) Determining the monthly costs for the homes that interest you. Use an online mortgage calculator to guesstimate your monthly mortgage payments, and be sure to add property taxes, insurance costs, and private mortgage insurance (PMI) payments to this figure. Next, determine utility costs and add these to your total monthly cost. Add maintenance costs - these are usually estimated at 1% of the home's cost per year. Take a look at this monthly number. Take a look at your income. Can you afford that cost at your current income? 4) Comparing your monthly income with total monthly costs. Take a look at the total monthly costs of your ideal home and your monthly income. Multiply your monthly income by 0.40. If the number you get is larger than your estimated monthly cost for your ideal home, most real estate experts agree that you can afford that home. 5) Consider your total monthly costs right now. Do you have a lot of debts to repay? How much do these take up every month? If you paid down these debts, would the difference allow you to make payments on your home? Are your monthly rental costs about the same or just slightly smaller than what you might exp