Sometimes on of the biggest challenges when you are looking to buy a home (especially for first time home buyers) is figuring out how much home you can truly afford. There are a lot of factors that you need to consider but the most basic of these is simply what payment do you think you can afford. If you are currently renting maybe you should use that as your starting point and then adjust upward for the additional amount per month you think you can pay without putting too much stress on your budget.
In general, you want to try and keep the cost of your home at less than 1/3 of your total income if at all possible (most lenders in fact want you to keep it to no more than 28% of your total income). So if you make $6,000 per month, you shouldn’t purchase a home that will exceed a $2,000 per month payment if you can avoid it (of course unless you simply have no other expenses like cars, student loans, credit card debt, etc.). If you extend yourself beyond that, you can expect your mortgage lender to ask questions.
We put together a basic home calculator that will tell you how much of a home you can afford in total sales price based upon a monthly payment and a given interest rate. If you simply adjust the inputs, we will output the sales price you should be looking at along with the final estimated payment below:
