![]() These costs cover important parts of the home-buying process, such as:ĭon’t forget to factor your closing costs into your overall home-buying budget. 1 Your lender and real estate agent will let you know exactly how much your closing costs are so you can pay for them on closing day. On average, closing costs are about 3–4% of the purchase price of your home. There are also closing costs to consider. ![]() But a down payment isn’t the only cash you’ll need to save up to buy a home. Don’t forget to factor in closing costs.Īll right, don’t freak out here. Use our calculator to try out other combinations to find the right mortgage amount, interest rate and down payment combo that will work for your budget.ģ. To get that number back down to a monthly housing budget of $1,250, you’ll need to lower the price of the house you can afford to $163,000. If you use our mortgage calculator and plug in a home value of $198,000 with a 20% down payment at a 5% interest rate, you’ll find that your maximum monthly payment of $1,250 jumps to $1,506 when you add in $182 for taxes and $71 for insurance. I know that sounds like a lot to keep track of, so let’s look at an example. And if you’re looking at a home that’s part of a homeowners association (HOA), you’ll need to factor in those lovely fees as well. If your down payment is less than 20%, you’ll need to add private mortgage insurance (PMI) fees to your monthly payment too (we’ll explain that more later). Remember: This is just a ballpark figure! Don’t forget that grown-up stuff like property taxes and home insurance will top off your monthly payment with another few hundred dollars or so. To save yourself the time and headache of doing a ton of math, use our handy-dandy mortgage calculator. See how much house you can afford with our free mortgage calculator! But if you're anything like me, you probably broke a sweat just reading that formula. Sure, you could crunch the numbers yourself by dividing a home price by 180 months (that's a 15-year mortgage) and then multiplying the decreasing monthly principal balance by your interest rate. Use our mortgage calculator to determine your home budget. Stick to that number and you’ll have plenty of room in your budget to tackle other financial goals, like investing for retirement or saving for your kid’s college.Ģ. (That includes the principal, property taxes, HOA fees, etc.) According to the 25% rule I mentioned, that means your monthly house payment should be no more than $1,250. Let’s say you earn $5,000 a month (after taxes). I want your home to be a blessing, not a curse. Following this rule keeps you safe from buying too much house and ending up house poor. ![]() To calculate how much house you can afford, use the 25% rule: Never spend more than 25% of your monthly take-home pay (after tax) on monthly mortgage payments. ![]() To calculate how much home you can afford, simply follow these five steps. After all, shopping for your “home sweet home” will feel very unifying and exciting once you both have a shared vision. You need to be on the same page when it comes to your budget and what’s realistic for your money situation. (I’ve never lost a patient!)Īnd for you married folks, make sure you and your spouse look at the results together. To figure out how much house you can afford, all you need to do is crunch a few numbers. How to Calculate How Much House You Can Afford ![]()
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