How Much House Can You Afford?

To determine how much house you can afford to buy, follow these steps:

1. Assess Your Financial Situation:

   • Calculate your total monthly income.

   • Review all monthly expenses, including debt (loans, credit cards, etc.).

     
     

2. Estimate Your Down Payment:

   • Aim to save at least 20% of the home’s purchase price to avoid private mortgage insurance (PMI).

     
     

3. Use the 28/36 Rule:

   • Spend no more than 28% of your gross monthly income on housing (mortgage, insurance, property taxes).

   • Keep total debt (including housing) below 36% of your gross monthly income.

     
     

4. Check Your Credit Score:

   • A higher credit score will help you secure a lower interest rate, increasing your affordability.

     
     

5. Estimate Mortgage Rates and Loan Terms:

   • Get pre-qualified for a mortgage to estimate the loan amount and interest rates you qualify for.

     
     

6. Factor in Additional Costs:

   • Include property taxes, homeowner's insurance, utilities, maintenance, and potential HOA fees.

     
     

7. Use an Online Affordability Calculator:

   • Plug in your income, expenses, and down payment into a calculator to get an estimate of how much home you can afford.

     
     

8. Consider Long-Term Financial Stability:

   • Plan for job stability, potential future expenses, and economic changes to ensure affordability over time.

By following these steps, you'll have a clear understanding of your home-buying budget.