"How much house can I afford?" Have you ever asked the question and are you still wondering the answer? Well, I have the answer for you.
There is no magic amount that you should seek for the perfect home. How much house you can afford is as unique as you are; It is based on many factors, including your location, income, savings, personal preferences and most importantly, a housing plan that you have.
The perfect way to buy a house is the 100% drawdown. Sounds odd, is not it? But imagine how fun it would be! Do not lend money. Time period. If I can not get you to postpone the purchase for so long, I always suggest that you save a payment of 20% or more, choose a 15-year (or less) fixed mortgage rate and limit your monthly payment to 25% or less of your monthly home payments.
You want to be a blessing, not a curse. If you buy a house with no down and heavy monthly payment, you invite Murphy to move into the spacious bedroom. You do not want Murphy as a housemate – believe me! Stay down and really think through everything before you jump first and foremost to make this big purchase. If you do not, you just have to give Murphy an open invitation to reach the house.
Here is Quick Checklist of Important Questions to review when you consider how much house you can afford. If you can not answer YES on these questions regarding the house you have eyes on, it's not wise to buy it now.
- Can I make at least 10% (preferably 20%) down payment?
- Can I maintain housing payments at or below 25% of my monthly home allowance?
- Can I afford to withdraw 15 years of mortgage lending?
- Am I working closely with real estate agents that I can trust?