Let's say you want to buy a $200,000 home and make a 20 percent down payment. That would leave you with a $160,000 mortgage. If you're a little tight on cash, then you might want to go for a 10/1 hybrid mortgage (more on this in a sec) that currently charges 5.8 percent interest. So, for the first ten years, your monthly mortgage would be $939. Add 40 percent, or about $375, to cover the day-to-day "extras," and your total monthly cost ends up in the vicinity of $1,314.
To test your readiness for ownership, open a savings account and each month deposit the difference between your current rent and the total cost of a mortgage plus extras (check the rates at EmigrantDirect.com, which tends to offer higher percentages). Using the preceding example, if you pay $1,000 in rent, deposit $314 in the savings account on the first of each month. If you can keep up with this routine for six months, then you can afford the extra cost of owning a home.