How do you know how much house you can afford?
Your cheatsheet for home buying affordability:
STEP 1: ADD UP YOUR TOTAL MONTHLY INCOME
STEP 2: MULTIPLY THAT NUMBER BY 25% TO GET YOUR MAXIMUM MORTGAGE AMOUNT (For example: if your monthly income is $6,000 / month, your mortgage payment couldn’t exceed $1,500 / month).
STEP 3: USE A MORTGAGE CALCULATOR (I like to use the Quicken Loan app) to plug in your numbers to determine your monthly mortgage payment based on the purchase price, down payment amount and interest rate.
STEP 4: Don’t forget to factor in other expenses such as utilities, appliances, ongoing home maintenance, taxes and homeowner’s insurance.
STEP 5: You’ll also need to budget for costs associated with the home purchase such as a home inspection, appraisal, closing costs, etc.
If you want to discuss specifics and find out what your personal numbers look like, the best step is to schedule an appointment with a lender who can talk to you about your options, different loan programs and any special financing that might be available.