![]() That should leave you with $1,292, or 31 percent to devote to your monthly mortgage, provided your overall debt does not exceed $1,792 a month. So, for example, if you make $50,000 in annual gross income, your monthly gross income is $4,167. (But remember that the rest of your budget is going to have to go toward heat, water, electricity, routine home maintenance and food.) Over all, your total debt-to-income ratio, including car payments and credit card bills, should not exceed 43 percent. ![]() Buyers with no other debt may be able to budget as much as 40 percent of monthly income to housing. This figure will change based on your amount of debt. The Federal Housing Administration formula, used by many lenders, recommends allocating no more than 31 percent of your monthly income to your housing payment. This figure includes your principal, interest, tax and insurance payment, which add up to your monthly mortgage sum. ![]() Once you have a better picture of your spending habits, determine how much you want to allocate toward a monthly home payment. If you can qualify for a loan, these rates add up to significant savings over the course of a 30-year loan. Interest rates on mortgages, near record-low territory, are around 3 percent. The Consumer Financial Protection Bureau offers a spending tracker that can help you figure out where your money is going each month.īecause of the pandemic, homeownership is more affordable than ever. Review your bank statements and spending habits for the last couple of months to figure out how much you are spending on everything from cellphone bills to streaming services to your weekly restaurant takeout. To determine how much you can spend on a home, take a close look at your budget. If both your lifestyle and the hard numbers point toward buying, the next step is to determine how much home you can afford. Still can’t decide if buying is for you? Check out The Times’s rent-versus-buy calculator to dig deeper into the difference in expenses. That means buyers should be prepared to make multiple offers and be aware that they may have to pay more than a home is listed for - sometimes thousands of dollars more - in order to get their offer approved. What’s on the market? If you can’t find a home you like, it’s likely not worth tying yourself to something you’re unhappy with.Īnother factor to consider: The current housing market is one of the most competitive in decades, with record-high prices and record-low inventory. ![]() How much home can you afford? If you can’t afford a home large enough to fit your family in a few years, it may be worth it to rent while you save a bit more.How long do you plan to stay there? If you expect to relocate in just a couple of years, renting is likely a better option.Here are some basic questions to consider when thinking about buying a home: In general, whether renting or buying is better for you largely depends on your specific circumstances. But the reality of routine home maintenance and repairs can quickly drain a bank account. Should you rent or buy? Buying may seem appealing because you will put an end to escalating rent and can build equity. When looking for a new place to live, the first question you ask yourself will help drive the rest of your decision-making. ![]()
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