You or any good Hawaii real estate agent can quickly determine your mortgage, tax, and home owners' insurance monthly payment. You can add in a logical amount for utilities. Don't forget to include something for maintenance and repair, more if the house is older. This should be your total housing cost. If it's a third of your gross income, you're probably okay, although some few people can manage when it's as much as half.

 

Chances are that in order to get a home, you're going to have to obtain financing for between 80 and 90 percent of the purchase price. As part of the financing process, the lender will secure a credit report on you as well as confir­mation of your income and expenses and an estimate of all the costs noted above. The lender, using profiles estab­lished after analyzing hundreds of thousands of similar borrowers, will grant you the loan only if it thinks you can afford to make the payments. While this does not guarantee you can afford the house, if a lender says you can, it's usually something you can bank on.

 

For first-time buyers the real issue here is often "sticker shock." The costs of home ownership can sometimes be double the costs of renting. In a panic such buyers some­times feel, "I can't possibly make those kinds of pay­ments!" Usually it takes several months of successfully making all the payments before we calm down and feel more secure in our investment.

 

And remember, while it almost always does cost more to own a home, it's important to consider that there are certain trade-offs. Up to certain very high limits, you can usually deduct your mortgage interest, which typically is the major portion of your mortgage payment (at least ini­tially) from your income taxes. You can also deduct your property taxes. These two deductions can be very sub­stantial, often in many thousands of dollars. They mean that you will owe less in income taxes at the end of the year, sometimes a lot less. Have your accountant make the exact calculation for you. If this is your first home and you haven't claimed these deductions before, you may be able to claim more personal deductions and increase your take-home pay significantly. As a result, though the house costs a lot more, owning it may actually increase your spendable income!

 

Of course, it is possible to get in over your head. This is particularly the case when buyers use some sort of "cre­ative financing," where they put very little down and have a whole series of mortgages, from an institutional lender, from a seller, and from third parties. Always keep in mind that there's a price to pay for everything, although that price may not be evident at first. Usually the price for putting less of a down payment into a prop­erty is much higher payments.