Can You Afford Your Dream Home?
Your income, or the money in your household that is consistently coming in, is the foundation for what you can really afford to pay each month. Realtor.com suggests using the 28/36 rule to avoid getting overwhelmed by budgets and numbers. They say that,
"The “28" refers to your monthly housing payments—things such as mortgage, insurance, and taxes—which shouldn't be more than 28% of your gross monthly income (ideally it should be less)....The “36" refers to your debt-to-income ratio, which compares how much money you owe (to credit cards, colleges, car loans, and—hopefully soon—a home loan) to your income."
Think about your monthly expenses. Do you have student loans, car payments, credit card bills, tuition or daycare fees? Don't overwhelm yourself financially by choosing a home that will put you even further into debt or barely treading water based on your monthly income. It's always wise to spend less than you can afford on your home. Why? Because there are so many unforseen costs in being a home owner. You need to save room for any costly upgrades, renovations or repairs once you move in. You also want to save for general upkeep such as landscaping, utility bills and cleaning.
There are many great resources available to help future home owners identify affordability. Here are just a few reliable sources to get started with:
This calculator will help you determine what price range you can afford for your new home.
This tool will help you calculate the mortgage amount that best fits your budget.
Find out if you are eligible for mortgage by using this debt to income ratio calculator by the experts at Zillow.
A lot of great information in this article regarding home affordability including some basic rules of thumb on calculating mortgage payments and housing payments. They also have their own home affordability calculator, check it out here!
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