Before you decide to enter the market to buy a house it is important to understand how much house you can afford. It is not a good idea to go into the market blindly without doing any research as this is one of the most important decisions you will ever make. Here are some tips to help you determine how much house you can afford.
- You want to keep your monthly mortgage payment no higher than 28% of your gross monthly income (before taxes are taken out). You also want to keep your total house payment which can include the mortgage, insurance, association fees, taxes, etc., no more than 32% of your gross monthly income.
- Don’t forget to take into account any other debts you may have such as student loans or auto loans as well as credit cards. All of your debts including the house payment should not exceed 40% of your gross monthly income.
For example: A couple making a combined annual income of $100,000 should keep their mortgage payments under $2,333 (28% of gross monthly income). With all taxes and fees included this couple’s house payment should also not exceed $2,666 (32% of gross monthly income). If the couple wanted the highest mortgage payment possible they could have up to $667 of other debts per month and still be able to afford the mortgage payments.
Please contact me with any questions you have regarding your future or existing mortgage. Don’t forget to get pre-approved before you begin house shopping. I am here to help!