About 20 years ago, buyers were told to consider their future income when they purchased a house.  For example, if they qualified for a $100,000 loan (a lot of money back then), but wanted to keep the purchase price around $85,000, they were encouraged to go ahead and spent the full $100,000 based on anticipated raises.

Yes, my first Realtor told me that.

However today I advise buyers of the exact opposite.  So how can really tell how much home you can afford?  My advise is you could anticipate what your monthly mortgage payment would be on the house you think you’d eventually like to buy.  Pay your regular rent, but pay yourself the different in a savings account of what that future house payment will be.

You will be able to save ahead for down payment and closing costs this way, while getting a solid reality check on whether you can afford that mortgage payment.

Another rule of thumb… make sure your house payment doesn’t exceed 25 percent of your income.  Okay, perhaps up to 32 percent might be okay but anything above that could be dangerous to your financial health.

Approach your ability to pay with plenty of skepticism, save ahead in case of emergencies, and don’t forget to plan for other expenses that go along with home ownership.  If you’ve already done this, consider buying now so you can take advantage of the $8000 tax credit being offered by the feds.  You must have a home under contract by April 30th and close by June 30th to qualify.

Home maintenance is so much more than changing your furnace filters every month, mowing the lawn, and closing your crawl space vents in the winter and opening them in the summer.  You also need to keep your refrigerator coils clean, clean around the dryer vents, get your chimney inspected, and much more.  CNN Money provides a great article with year-round maintenance tips, including:

Inspect your roof. Grab some binoculars and look for loose shingles, mold, mildew, or cracked chimney mortar. Catch problems early and you may avoid spending $2,000 to $12,000 (and up) for a roof replacement.

Check your attic for holes or thin spots in the insulation, and make sure the caulking around doors and windows doesn’t leak. Keep in mind that your attic should be only 5° to 10° warmer than the outside air; any hotter and you could develop ice dams on your roof, which can cause water leak.

There are dozens of great ideas in this article and if you have tens of thousands of dollars (or hundreds of thousands) invested in your home mortgage, pay attention and do what needs to be done to preserve your asset!

Photo by Collin Anderson via Flickr Creative Commons.

2010 is going to be an interesting year for taxes. There are a number of tax breaks available that haven’t been available before. Here are two home-related tax moves for you to consider in 2010:

1. Buy a Home

The first time home buyer tax credit has been expanded and extended so that you can get the $8,000 first time tax credit until the end of April. Additionally, if you already own, you can get up to $6,500 when you buy. If you are planning to buy in the next couple of years, this might be the year to do.

2. Green Home Improvements

If you are thinking of making your home more energy efficient, 2010 is your year. There are tax credits available for putting in solar home heating systems, replacing your windows, adding insulation, and more.

Plan out the year ahead so that you can do your best to reduce your tax liability. Figure out what you want, and then decide how you can make it work within your budget.

One of the goals many people have, whether it is for this year or for some point in the future, is to buy a home. However, many neglect to save up for a down payment. This is because a couple of years ago, you could buy a home without a down payment. The game has changed, though, and you need to be aware that a down payment is a necessity in the current climate. (In fact, such common sense should never have been abandoned in the first place.)

At any rate, it is wise to plan ahead to save up for a down payment. You should figure out your price range for a home, and then decide on your down payment size. You will need at least 3.5% if you are getting a loan through the FHA. If you want a different loan, though, you may need between 5% and 10% of your home’s purchase price. A mortgage lender or broker can help guide you in some cases.

This means that you will have to save up thousands of dollars. If you are buying a home for $180,000, you will need $6,300 if you go with the FHA loan. For a 10% down payment, it will require $18,000 ($9,000 for 5% down). You can see how planning may be required.

You should save up using some sort of high yield savings account so that you get a little extra in terms of interest. Figure out where you may have to cut back in order to save up a monthly amount of money, depending on your time frame. For instance, if you want to save up a 5% down payment in a year, using our $9,000 scenario, you will need to set aside $750 a month. This can also serve as a good gauge of whether or not you are ready to take on the costs of home ownership.

In the end, buying a home is a big financial commitment. You really should be ready for it.

While the housing market is slowly improving, the fact of the matter is that foreclosures are still very much on the market, and provide a number of interesting opportunities to buy. However, as you move forward with buying foreclosures, it is a good idea to keep some of these considerations, from Real Estate Pro Articles, in mind:

1. Look for a foreclosure in a good location.

2. Research your foreclosure choice, and learn about its back story. Watch out for liens against the home.

3. Keep within your budget, understanding that sometimes even foreclosures can end up out of your price range.

4. If you decide to buy a foreclosure at an auction, make sure that you understand the rules.

5. Know that an auction is not your only choice. You can look for foreclosure listings elsewhere and buy homes from a number of sources.

It is also possible to look into other distressed homes, such as those in pre-foreclosure, or homes that are being sold short, for less than the owner owes.

Many people choose not to make financial New Year’s resolutions, fearing that they won’t keep them. I say go for it. Those who make resolutions are more likely to accomplish the changes they desire than those who don’t resolve on anything. Last year, I made a resolution to refinance the house. I didn’t get around to it. But 2010 is the year. Mainly because I’m afraid that interest rates will rise and I’ll have missed the boat.

In order to reach my goal, though, I’ve got to do a couple of other things:

* Make sure that my credit score is up to snuff. So I’ll check it soon and then see if I need to have errors removed from my report, and do something else to get a little boost.

* Have the house appraised. An appraisal will be needed to asses my current loan to value ratio. I haven’t been in the house very long, so I don’t have a lot of equity, but I know I’m not upside down.

* Look at my options. Interest rates are low enough that I can refinance to a 20 year loan and pay only a little more than I am paying now per month. So that might be a possibility rather than refinancing to a 30 year loan.

I’ll also have to actually go into the credit union and talk to someone about it. And while I’m at it, I’ll probably ask about a Health Savings Account, since that’s another one of my financial New Year’s resolutions.

After spending some time below 5%, most mortgage lenders are quoting rates above 5%. With the prospect of economic recovery combining with the fact that housing starts are rebounding providing some hope, mortgage interest rates are on the rise.

However, even if you don’t lock in a rate right now, you are still likely to be able to reap the benefits associated with historically low mortgage interest rates in general. Even with refinancing, it is possible to get a reasonably low rate.

If you have been thinking about buying a home, or about refinancing, now might be a good time to consider it. If you plan to refinance, do a cost-benefit analysis to see if the savings from having a lower mortgage interest rate outweigh the fees that you might have to pay for the refinance.

It’s tax time, and you probably know that you can deduct your mortgage interest on your taxes. However, it’s not just your mortgage interest. There are other deductions related to having a mortgage and having a home. Here are some of the deductions to avoid overlooking as you start getting into gear for tax season:

* Points paid this year for a home mortgage to reduce the interest rate.

* PMI.

* Property taxes.

* Green home improvements.

There are plenty of opportunities to reduce your tax liability. Think about what you have done with your home this year, and consider what might be eligible. If you have a question about what is eligible, and how you can take your tax deduction, you should contact a tax professional or the IRS.

Now that the year is drawing to a close, it’s time to consider your taxes. It’s always best to prepare as early in advance as you can. This way you’ll be less stressed. And one of the things to watch out for is the mortgage interest statement from your lender or loan servicer. Keep watch for all these items in the mail right after the first of the year, and file them away together.

Then consider whether or not you should take the mortgage interest deduction. Look at how much interest you paid on your home mortgage loan this year, and see whether, with other deductions, it exceeds the standard deduction. For most tax filers, you will have a standard deduction of $5,700 for single and $11,400 for married filing jointly.

You can itemize to see if you can exceed that amount. Add up your charitable donations, mortgage interest paid and other deductible items on Schedule A of Form 1040. If you end up with more than the standard deduction, you are ahead to itemize. Don’t settle for the standard deduction when you could very well get a bigger deduction.

For the second quarter in a row, home prices have risen. The Case-Shiller index was released this morning, and showed that home prices rose in the 3rd quarter. This could be good news for those whose homes are underwater, as the improving home prices would help alleviate the issues concerned with negative equity.

However, there is still a ways to go, in spite of the improvement seen. MarketWatch reports on the state of the housing market right now:

“We have seen broad improvement in home prices for most of the past six months,” says David M. Blitzer, chairman of the index committee at Standard & Poor’s, in a statement.

“However, the gains in the most recent month are more modest than during the seasonally strong summer months. Fewer cities saw month to month improvements in September than in August in both seasonally adjusted and unadjusted figures.”

There are hopes that the extended first time home buyer tax credit will help spur more home buying — and help home prices on the road to recovery.