Wondering \u201cHow much house can I afford?\u201d You\u2019re not alone. Buying a home is likely the largest financial investment you\u2019ll make. You want to find a great spot that you can comfortably grow into and enjoy for years to come, but you also don\u2019t want to end up spending more than you can comfortably afford to pay.<\/p>\n\n\n\n
Making such a big financial move can feel daunting, but it doesn\u2019t have to be. This simple guide can help you determine your home affordability.<\/p>\n\n\n\n
There\u2019s a lot more to home affordability than the asking price on your dream home. Before you make an offer, you want to consider if you can comfortably afford the overall price of the home and<\/em> make monthly mortgage payments.<\/p>\n\n\n\n Before you start home shopping, it is a good idea to get a sense of your overall price range so you can feel comfortable knowing you aren\u2019t taking on a home\u2014or a mortgage\u2014that will leave you cash strapped. Here\u2019s what to consider:<\/p>\n\n\n\n Calculate your post-tax income\u2014as well as any income from your co-borrower.<\/p>\n\n\n\n Calculate all of your monthly financial obligations outside of your mortgage payment. Most experts recommend your debt-to-income ratio, calculated by dividing the sum of your debts by your gross monthly income, not exceed 36%<\/a>. Your DTI should include your debts, expenses, and potential mortgage payment.<\/p>\n\n\n\n How much do you have saved to put toward a down payment? While you can get a conventional loan for as low as 3% down<\/a>, most experts recommend aiming for 20% down. The more you can pay upfront for a home, the less you\u2019ll pay overtime.<\/p>\n\n\n\n Closing costs range from 2 to 5% of the total price of the home<\/a>, paid upfront.<\/p>\n\n\n\n Figuring it all out can feel overwhelming. Thankfully, a home affordability calculator<\/a> can do the work for you.<\/p>\n\n\n\n Beyond knowing what home you can afford, you\u2019ll also want to make sure you can comfortably afford the monthly mortgage payment without sacrificing your lifestyle. Mortgage payments typically include much of the monthly cost of homeownership such as payments toward your principle and interest, insurance costs, and property taxes. Here\u2019s what to consider:<\/p>\n\n\n\n The estimated price of your home, taken from your own calculations or a home affordability calculator.<\/p>\n\n\n\n How much you can afford to put down will lower the overall cost of your mortgage.<\/p>\n\n\n\n Many buyers opt for a 30-year loan, but you can get a shorter loan term. Your mortgage will be spread over your loan term.<\/p>\n\n\n\n Interest rates change daily. Many mortgage affordability calculators calculate current rates for you. You can also pre-qualify for a mortgage to see what rate you might be eligible for without impacting your credit score.<\/p>\n\n\n\n Your local tax assessor\u2019s website can help you estimate property taxes.<\/p>\n\n\n\n Homeowners insurance costs vary widely by state and local. Though, on average, you could pay at least $35 per month per 100,000 spent on a home<\/a>.<\/p>\n\n\n\n If you live in an area prone to flooding, high winds, or earthquakes, plan on paying for extended insurance coverage.<\/p>\n\n\n\n If you\u2019re considering a neighborhood with a HOA, factor those costs in.<\/p>\n\n\n\n If you put less than 20% down on a home, you may have to pay for private mortgage insurance. PMI (or mortgage insurance premium for Federal Housing Administration-backed loans) is often required until you pay down some of the principle of your home and build equity.<\/p>\n\n\n\n The mortgage affordability calculator below can do the calculations for you and help you estimate some costs.<\/p>\n\n\n\nHome Affordability Calculator<\/h2>\n\n\n\n
Annual Income<\/h3>\n\n\n\n
Total Monthly Debts<\/h3>\n\n\n\n
Down Payment<\/h3>\n\n\n\n
Closing Costs<\/h3>\n\n\n\n
Mortgage Affordability Calculator<\/h2>\n\n\n\n
Home Price<\/h3>\n\n\n\n
Down Payment<\/h3>\n\n\n\n
Loan Term<\/h3>\n\n\n\n
Interest Rate<\/h3>\n\n\n\n
Property Taxes<\/h3>\n\n\n\n
Homeowners Insurance<\/h3>\n\n\n\n
Specialty Insurance<\/h3>\n\n\n\n
Homeowner Association Dues<\/h3>\n\n\n\n
Private Mortgage Insurance<\/h3>\n\n\n\n