Helping your clients determine how much home they can really afford can be tricky. These days, the financial factors include much more than the loan amount a consumer pre-qualifies for.   Check out these 5 keys:

1. Monthly Payment: Conventional wisdom tells us that your mortgage payment should be no more than 28% of your gross monthly income. This means that if you make $50,000 a year, the maximum amount you would safely want to pay each month is $1,166. The National Association of Realtors also gives this simple equation for renters to use to figure out how much they can afford. Multiply your rent by 1.32 and that will equal your affordable mortgage payment

2. Savings: You will need money to bring to the table when you buy a house.   This is the main issue that holds back many of the new home owners.   Closing fees  consist of Discount Fees, Processing Fees, Title Insurance Fees and Third Party Closing Fees.   This can be up to 10% of the purchase depending on your discount fees.   These fees can be supplemented by the seller.

3. Downpayment: This is savings in addition to your emergency fund. And a downpayment can be as little as 3.5% with an FHA loan or up to  20 percent for a conventional loan.    This is in addition to the closing cost and can NOT be helped by the seller.

4. Emergency Fund: Before you even begin to think about buying a house or moving, you must have emergency funds in the bank. This means you need to add up your living expenses for a month and have enough for several months. This include all the necessities and things that must be paid (rent or mortgage, car payments, insurance, food, gas money, electric, phone, tuition, day care, etc). You must have this in case you or your spouse loses your job, gets sick, or some other disaster hits your family.

5. Lifestyle and Extraneous Factors: Everyone has different wants and needs. You may be fine spending a little more for the house of your dreams in exchange for taking fewer vacations. Others abhor the statement, “house rich, cash poor,” and instead would rather have funds for shopping, dining out, and travel.