Home ownership is associated with higher levels of happiness and satisfaction Degrees, according to a study by Robert D. Dietz, Department of Economics, Ohio State University, on The Social Consequences of Home ownership. Based foreclosure statistics 43% of American families pay more than they make each year and, on average, 1 out of every 200 houses will be foreclosed on. Buying within your means, and figuring out how much you can afford, will help you avoid foreclosure. A good technique is to calculate your debt-to-income ratio. This ratio compares your fixed expenses. It is also one of the methods if you qualify for a mortgage, lenders use to determine.
Contain your fixed monthly costs, such as the monthly payments of the loan you are considering, car loans, auto loans, minimum credit card payments, child support, alimony and student loans.
Add your income that is gross up. Include your basic salary, hints and some bonuses and commissions you receive. If you are self-employed, a seasonal worker or your wages depends on bonuses and commissions, calculate your annual gross income and divide by 12 to get an average monthly gross income
Divide your monthly fixed expenses by your monthly gross income and multiply by 100. This will give you your debt-to-income ratio. By way of example, in case you’ve got a monthly income of $3,000 and spend $1,000 in fixed costs, your debt-to-income ratio would be 33.3 percent (1000: 3000 * 100 = 33.33). Lenders usually need your debt-to-income ratio to be less than 38% of your monthly income.
Fix your finances so that your debt-to-income ratio is as low as you can. Although lenders might set limits on debt-to-income ratios, just you know what percentage of your income you want to cover non-fixed expenses, such as food, clothes, ballet classes and amusement.
Save enough money to support yourself for at least three weeks. This will give you time to discover a job if you are fired or your income is diminished. According to a research on 60,000 homeowners by the Homeownership Preservation Foundation, 32 percent of foreclosures occur after a job loss and 42 percent of all Americans don’t have enough savings to cover their expenses that are fixed for 3 weeks.