How Much House Can I Afford - Mortgage Affordability Calculator
Forget traditional mortgage qualification rules-of-thumb like 28% or 36% of earned income. These rough guidelines don't accurately answer the "how much house can I afford" question because too many other financial variables are ignored.
Instead, use this mortgage affordability calculator to convert what you currently pay in rent (or could afford to pay in rent) into the equivalent mortgage payment. By using actual cash outflows (rent) and current interest rates you get a more realistic perspective on how much mortgage you can afford.
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How Much House Can You Afford?
Are you thinking about buying a house and getting a mortgage?
If so, you’re probably hearing advice from friends, family, and co-workers about how much house you can afford.
The traditional rule of thumb is 26-38% of earned income depending on risk tolerance and other budget factors.
A more direct route to a more accurate answer is to use this Mortgage Affordability Calculator to show you the mortgage you can afford based on the rent payment you can afford to make.
In other words, instead of using rules-of-thumb percentages, the Mortgage Affordability Calculator converts rental costs into ownership costs thus keeping your housing budget constant.
Below are some additional tips to help you decide if you are truly ready to become a homeowner.
Signs That You Are Ready To Buy A House
The math of housing affordability is important, but consider the following questions affecting your home ownership decision before committing.
In addition, there are other important, non-financial considerations to work through as well:
Think through these issues as you’re working with the Mortgage Affordability Calculator to determine if the house you are considering is truly the right fit for your needs – both budget and personal.
How To Find An Acceptable Monthly Payment
If you’re not sure what to enter into the “rent payment you can afford” box, that’s okay. Use the Budget Calculator to determine a proper housing allowance based on your income.
Another alternative is to start and maintain a budget that takes into account all your expenses. A good software solution is You Need A Budget which you can buy here for a 10% discount (affiliate link).
The key is don’t make yourself “house poor” by committing too much of your budget to mortgage, taxes, and insurance. You need to leave enough money in your budget to fund retirement, the kids college, and have a little fun once in a while.
Life can be very difficult when you are strapped with mortgage payments greater than you can comfortably afford.
Besides overspending, another common mistake new homeowners make is buying before being fully prepared for the added responsibilities.
As a homeowner, you’ll always face ongoing responsibilities and repairs, especially if you buy an older home. You will want to improve your home to match your needs, and you’ll also have taxes and insurance to pay – none of which you’ll be used to as a renter.
Before you decide to buy a house, it is important to weigh your options. The Mortgage Affordability Calculator will help you find a real-world mortgage that you can afford.
Mortgage Affordability Calculator Terms & Definitions
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