I purchased my first home 9 years ago.  It was an exciting and scary time for me and my family.  I had always dreamed of owning my own home.  Most people think of it as a great financial investment.  While that is true, I never thought of it as an investment in the monetary sense of the term. I viewed it as an investment in improving the quality of life for my family.

At the time, my son was 5 years old… and while living in an apartment was ok… it was time for him to have his own yard so he could run around and play with the dogs.  It was time for me to have my own patch of grass so I could experiment with gardening.  It was time for the DH to have his own space… a little outdoor workshop so he could channel his inner Bob Vila.

You know a place to call our own… a home with the white picket fence so I can raise my 2.5 kids and a dog. Well I don’t really have a white picket fence… it is more like black wrought iron.  I don’t have 2.5 kids… I have 2. And I don’t have a dog… I have a poodle and a terror (also known as a Jack Russell Terrier).

Anyway you get the point… the all American dream!

But buying a home is a big decision.  There are so many things you need to consider.  Which subdivision?  How many square feet?  How many bedrooms?  Which school district?  And so on… and in addition to making those choices, there is also a lot you must learn.

Buying a home exposes you to a world of other little issues that you never had to worry about before… adjustable rate mortgages… fixed rate mortgages… interest only mortgage… and other fancy mortgage loan products, PMI, home warranties, property taxes, homeowner’s insurance, home maintenance, neighborhood associations… this list could extend for pages, I will stop here because you get the idea.

However, of all the issues, I think the biggest one that you should understand before you sign on the dotted line is: How much house can you afford?

They say that your mortgage loan should be no more than three times your annual household income.  So if your household income is $60,000… then your mortgage loan should be in the $180,000 range. But depending on your part of the country… $180,000 can equate to merely a shack (California) or a mini mansion (Mississippi).

But even this 3 times your income rule is relative.  If you have a low interest rate… 3 times your income may be fine… but if you have a high interest rate or get one of these questionable mortgage loans… 3 times your income many not be enough when payments begin to balloon.

Besides the mortgage payment, you’ve also got to take into account the other expenses of owning a home.  A safe estimate is that other expenses will run about the same as another mortgage payment.

Utilities such as electricity, gas, water… $400 a month

Lawn maintenance… $75 a week

Those communication services we can’t do without, phone, high speed internet, cable/satellite… $200 a month

Property taxes… take a pick… this can range anywhere from $1,000 to $8,000 or more per year depending on your state and country laws and the value of your home.

Regular maintenance… cleaning air ducts, shampooing carpet, power washing the exterior to remove mildew, applying fertilizers, spraying for insects, weatherproofing outdoor furniture… and on and on.

And of course… you’ve got your occasional emergencies… plumbing backs up, air conditioner goes out, Hurricane Gustav blows half the shingles off the roof but you’ve got to meet a $5,000 deductible before the homeowner’s insurance kicks in (this is the little emergency I recently encountered).

Then you’ve got the one time expenses… furniture, appliances, and curtains… don’t forget about the curtains.  Some people may not realize how expensive it can be to put up window treatments in every window of a house.

Use a good online calculator to figure how much house you can afford, but don’t forget to consider all the other expenses that come with home ownership.  That will help you understand how much house you can really afford.