What you can afford depends on your income, credit rating, current monthly expenses, down payment and the interest rate. Owning a home is the American Dream. It’s a great way to create wealth and pass it on to your family, build a nest egg for college or retirement, and protect against life’s setbacks. It starts with being smart about money.

To determine how much you can afford, you first need to know your monthly income. Second, you will need to calculate your monthly expenses which may include credit card bills, car payments, insurance premiums and all other debts. HUD’s “Determining What You Can Afford Worksheet” will help you calculate your income and expenses to help determine what you can afford. The U.S. Department of Housing and Urban Development (HUD) wants all Americans to manage their money and have the option of preparing for homeownership. The key steps every home “OWNER” should consider are:


Set a goal to save a certain amount of money each month and stick to it. Set money goals and develop a plan to reach them. Decide what’s important to spend, then save the rest for a rainy day. This is how you can build a nest egg for a down payment on a home.

Watch Spending and Savings

Prioritize your family’s spending needs so that saving becomes second nature. Putting a little money aside every month takes hard work and requires someone to make difficult choices. But, the rewards can be great. Learn about the power of compound interest. Teach your children that a few hundred dollars invested now can turn into thousands of dollars over time.


Communicate early and often with companies or banks you owe money to so you can work out problems before they grow larger. Many consumers, including homeowners, feel trapped by debt. But there may be other options. Contact the people you owe. They may be willing to work with you to develop new payment plans. It will show that you are serious and smart about money.

Elevate Your Credit Score

Know your credit score and what it means to banks and credit card companies and your future. The importance of good credit is a fact of life. Banks and credit card companies decide whether to lend you money and what interest rates you will pay based on your credit score. Be prepared to examine past choices and, if necessary, to change your money habits. Decisions you make today will impact your future options.

Read (& Understand) the Fine Print

Consider all the options, educate yourself, and be informed before you sign on the dotted line. Consumers have more ways than ever to buy a home. Know your rights. Homebuyers should understand their mortgage contract and be on the look-out for scam artists and predatory lenders. A HUD-approved housing counselor (1-800-569-4287) can help.