Buying a house is an exciting time in a person’s life. Dreaming about owning a home is something almost everyone does. Owning a home is your own piece of paradise, something that you get to live in and enjoy. It’s a place that you can make your own. When you start going through the motions of buying a house, the first step is knowing how much house you can afford.
Talk to the bank
It’s safe to say that a bank might not give you the answer you’re looking for. In fact, a bank might approve you for too much or they might approve you for too little. Unless you’re paying cash, the bank has the final say in how much you’re approved for. It’s wise to know how much you can personally afford, so you’re not taking out a loan that’s too much for your budget.
Go off the least amount you make each month
If you work for a job that makes different pay each week, you may have a slight problem. It’s easy to think you make that much money all year, but obviously you may have slow periods in your job. Go off the least amount you make every month. That way, even when you’re making your lowest paycheck, you can still afford your house payment.
Pay off as much debt as possible
Before you even try to buy a house, pay off as much debt as you possible can. The truth is that you don’t know how costly a house can be down the road, which may cause you to take out a home improvement loan. Before you even think about how much house you can afford when buying, always pay off as much debt as you possibly can. And work really hard to stay out of debt!
Utilize a home purchase calculator
The average person isn’t great at math. Instead, most of us are living off of what we think we can afford, which isn’t wise. You can utilize a home purchase calculator to help you get down to exact numbers. The home purchase calculator will help determine how much of your monthly income can go towards purchasing a home.
Know the percentages
In order to know how much house you can afford, when buying, you need to know the amount you can put towards a payment each month. A good example is knowing that only 25% of your bring home pay should go towards your house payment.
- Know how much your take home pay is
- Take your take home pay and divide by four (your house payment should be 25% of your income, or less)
- If your take home pay is $10,000 a month, your mortgage shouldn’t be more than $2,500 a month
This formula is a pretty simple way of determining how much house you can afford.
Know what the costs of home ownership is
Many people want to buy a house, but they’re not sure of the costs associated with it. Home ownership can actually be very costly. Which is why it’s important to even get 1 or even 2 home inspections done, during the home buying process. Home ownership comes with basic costs such as utilities. However, additional costs can also creep in without you realizing it.
- Roof repair
- Basement repair
- Potential water damage
- Ongoing maintenance
- Unexpected repairs
Consider a large down payment
You may hear of people talking about down payments because this means they can actually afford more house. A down payment brings the cost of your loan way down and your monthly payments way down. The more you can put down on your house, the better!
Only move forward – if you feel comfortable!
Buying a house is a big deal. It takes time to research and know what you can afford, payment wise each month. It’s better to take your time now and figure out WHAT you can afford, so that you’re not scrambling around later. Let’s not forget that house insurance and PMI insurance is often involved in a house buying process.
How Much House Can I Afford? What To Consider for First-Time Buyers. Buying a home for the first time can be nerve-wracking. But you don’t want to be house poor. House poor is when you are too poor to enjoy anything else in life because you have such a large house payment. Yes, houses are nice, but only if you can afford the monthly payment that comes with it.
Keep in mind that owning a house is going to be one of the biggest decisions of your life. Some people do it right and other people rush it. Take your time and pick out a house you can afford because then you will love it even more!