If your family is contemplating a move, you are probably asking yourself how much house you can afford.
This is such a smart place to start! It is easy it is to fall in love with a home and Â start imagining raising your family in it, only to find it does not fit within your current budget.
It is easy it is to fall in love with a home and Â start imagining raising your family in it, only to find it does not fit within your current budget.
This feeling can also cause you to make a home-buying decision that isnâ€™t good for your family long-term, according to our partners at Progressive Insurance. Doing some research before you buy is a great way to avoid both of these problems.
There is a lot to learn about and to consider before buying a new home.
There are two pieces of information that you need to gather: how big of a loan you can get and how big of a loan you can afford. These are two different things!
One of the best resources to use to clarify both house affordability and how different price points would affect our everyday lives is NerdWallet.
In terms of affordability, at a very basic level, there are two things that a bank will use in deciding how big of a home loan people can take:
- What percentage of your gross income are your monthly housing costs.
- And what percentage of your gross income is your monthly housing costs and other fixed payments and debts.
According to NerdWallet, your monthly housing costs should (conservatively) total 28% or less of your gross income (your salary before taxes and deductions).
Your monthly housing costs include:
- Payments toward your mortgage principal
- Real estate taxes
- HomeownersÂ insurance
Your other fixed costs may include:
- Student loans
- Car payments
- Credit card debt
- Health and car insurance
- Utilities and bills
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