What House Can I Afford?
I’m always happy to pass on great info...and this is great info! I’ve included a few snippets below lifted from the full article.
As you prepare to buy a home, you may be wondering just how much house you can afford. This is entirely dependent on your current income and debt situation, but there are some rules that you can follow. These rules are more financially conservative, but they will decrease the chances of you going into foreclosure and make it much easier for you to afford your home. It can be very frustrating to be house poor and not be able to do the other things you really enjoy doing because so much of your income is going towards your house payment. If you cannot afford to buy a home, it is better to wait until you are ready. Be sure that you do not take this step just because you feel pressured to buy a home.
The Twenty-Five Percent Rule
The most basic guideline is that your house payment should not be more than twenty-five percent of your monthly income. This is the general rule that the mortgage company follows, but in reality, you should work to keep your entire debt load down around twenty-five percent of your income if you want to be comfortable and reach your other savings and retirement goals. If you have car payments and student loans you may want to lower the amount of your mortgage to around twenty percent of your income. It is important to realize that the banks may be willing to lend you more money than you can really afford. It is up to you determine the right amount for your budget. If you are planning on having one spouse stay home with your children, you should budget as though you only have one income, especially when it comes to your mortgage.
Work Out Your Budget Before You Start Shopping
Before you start shopping for a new home, work out a budget with a house payment. In addition to the payment, you will need to budget for home insurance, taxes, and housing repairs. You should set aside a bit of money each month to cover remodeling and home repairs, such as plumbing issues, air conditioning issues or any other areas for which you are responsible. This is the reason you do not want to stretch yourself too tightly when it comes to your house payment. You need to leave enough money in your budget so that you are able to cover your other costs. Other additional costs may include water and garbage pickup, and your power bill can go up because you are heating and cooling a larger area. You can practice living on your new budget for a few months before you buy your home. Put the extra money you would be spending into a savings account as the start of the sinking fund for your new home.
Do you need more detail on this subject? Head on over to the full article here for more ideas and perspective. Afterwards, why not drop me an email to share your thoughts at [email protected]; or call me on 0401 714 406.
Thanks,
Darren