Chapter 3
What Can You Afford to Buy?
IN THIS CHAPTER
Determining the costs and tax benefits of homeownership
Understanding the impact of new tax laws limiting property tax and mortgage interest write-offs
Getting a grip on closing costs
Accumulating and investing the down payment
When you’re in the market for a car, the auto salesperson will eventually ask, “What is your budget?” or “How much can you afford to spend on a car?” Of course, they hope that a large number rolls off your tongue. If you’re like many car buyers, you may be likely to say something along the lines of, “I’m not really sure.”
Many car buyers today finance the purchase — so they allow a banker or other lender to determine how much car they can afford. Such determinations are based on a buyer’s income and other debt obligations.
But here’s where most people get confused. When a lender says you qualify to borrow, say, $30,000 for a car purchase, this doesn’t mean you can afford to spend that much on a car. What the lender is effectively saying to you is, “Based on what little I know about your situation and the ...
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