You might see a house for sale in a nice area, and think, “Could I get into a house like that?” Even if you’re not thinking about selling your home this year, you might be wondering how much of a new home you could afford.
Why not find out?
It only takes a few calculations to determine how much of a new home you are qualified to buy. Several factors include estimating how much you can get for your house on today’s market; determining what type of home you want and establishing what a house like that would currently sell for; and then looking into your income, savings, and other financial resources.
By having a good grasp of your finances, you could prevent situations such as a foreclosure and keep yourself financially secured in the long run.
It pays to have forethought when it comes to spending on your next home, so here are a few tips to help you down that line:
- The 36-Percent Rule
Data from the Bureau of Labor Statistics show that homeowners with children under the age of six actually spend 36.3% of their income on housing costs which include mortgages. This could serve as a baseline that factors into your decisions. At any rate, following the 36-percent rule allows you to align your income with potential long-term expenses.
- Work Out A Budget Before House Hunting
Before purchasing your new home, be sure to set a budget. This should include the potential mortgage payment and other factors such as home insurance, taxes, house repairs, and utilities. Setting a budget puts a cap to your spending and helps you adjust your lifestyle in line with the financial responsibilities you need to shoulder.
- Compare With Your Household Expenses
After mortgages, home insurance, and taxes, you will need to compare these expenses with regular household spending. How much are your monthly expenses? Does your mortgage premium fit into your budget? Always keep in mind that before you commit to a mortgage, you need to be absolutely sure you can secure daily needs such as groceries, transportation, school, and leisure.
Once you put it all together, you can create a realistic and foolproof financing strategy. In fact, doing so helps you determine how much you can actually afford as your shop for the perfect home.
Ready to buy your next home? Work with a real estate expert. Give us a call today!