Home Buying: How Much House Can you Afford?

Posted on by Smith Marketing

How much house can you affordThinking about buying a home? The first thing to do is determine your price range, or in other words, how much house you can afford. There’s more to it than just applying for a mortgage and finding out how much you qualify for. You will always qualify for a higher amount than you should actually spend on a house. So how do you figure out your price range and then find homes priced within that range?

Neighborhoods such as Grandover Greensboro have a range of homes in different sizes, locations, and price ranges. Don’t feel like you have a choose a neighborhood where all of the houses are about the same size and price, because it may encourage you to buy a home that is too much for you to afford.

How to Calculate your Home Buying Budget

There are online calculators that allow you to plug in some basic information and it will give you an estimate of how much house you can afford, such as this one on bankrate.com. You’ll need to calculate your income and that of your spouse, partner, or co-buyer. That includes wages, alimony, investments, dividends, and any other sources of income. You’ll also need information about the home, such as the down payment amount, loan term, real estate taxes, homeowner’s insurance, and interest rate. Then you’ll need to calculate your monthly expenses and debts. All of this information is used to determine your house price range.

How Much of Your Monthly Income Should go Towards Housing?

It is recommended that no more than 28% of your income should be absorbed by housing expenses and that no more than 36% of your income should be paid toward debt. Having too much debt can lead to financial trouble because you’re left with no liquid income for emergencies. Just because a lender is willing to give you a mortgage for a certain amount doesn’t mean you should max that out on a home. Take the figure you prequalify for and come down at least 20%, but 30% is even better. That should be the top end of your price range. 

Don’t Make Yourself “House Poor”

The phrase “house poor” refers to people who spend so much on their home that they don’t have enough money left over to spend on anything fun. If you buy a luxury home that is out of your price range, you better be very pleased with it, because you’ll be spending a lot of time there. You won’t have any money left over to go out to eat, do activities, or take vacations. 

Work with Real Estate Agents you can Trust

A trustworthy agent should respect your price range and not try to talk you into purchasing a home you can’t afford. Smith Marketing and Allen Tate RealtorsⓇ are on your side, to help you find the best home within your budget. 

Looking for luxury homes that will fit your budget?

Grandover Greensboro is a popular neighborhood with luxury homes in varying sizes and price ranges. If resort-style living sounds like your style (or even if it doesn’t), call Smith Marketing and Allen Tate RealtorsⓇ at (336) 215-7880 to speak with a reliable agent.