Buying a home is a numbers game, but it’s also an emotional game. That’s why from the get-go, I encourage buyers to only consider homes they can confidently afford.
Setting aside what lenders say, buyers should take the time to “try on” various mortgage payments and find the one that fits the best and feels the most comfortable.
That said, some guidelines can provide a starting point for answering the question: How much home can I afford?
Most financial experts say housing expenses should be no more than 28% of your total pre-tax income. This includes your monthly P&I mortgage payment, homeowners insurance and property taxes.
For example, if your salary is $55,000 per year, your gross monthly income is $4,583 ($55,000 divided by 12). Your total housing costs (principal, interest, taxes, and insurance) shouldn’t exceed $1,283 per month (28% of $4,583).
Keep in mind that total debt should be under 36% of your total pre-tax income. This includes housing costs mentioned above and credit cards, car loans, personal loans, and student loans.
Save this post for later, or share it with anyone you know who has plans to buy this year. And, of course, reach out if I can answer any questions that come up along the way!
Cindy Grenier - 204-330-2567