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How much home can, or should you afford?

As with any large purchase the saying “Caveat Emptor”, or buyer beware holds true today probably more so than any other time in history and beside knowing the condition of the home you're buying, knowing how much home you can afford is no exception to ensure a bright future in home ownership.

There are a few different ways to calculate how much house you can afford, but the most common method is to use the 28/36 rule. The 28/36 rule states that you should not spend more than 28% of your gross monthly income on housing expenses, and no more than 36% on total debt. Housing expenses include your mortgage payment, property taxes, and homeowners insurance. Total debt includes your mortgage payment, as well as any other debt you have, such as student loans, credit card debt, or car loans.

It's important to note that the 28/36 rule is just a general guideline. Your actual ability to afford a home may vary depending on your individual circumstances. For example, if you have a high credit score, you may be able to qualify for a lower interest rate on your mortgage, or if you have a large down payment, you will be able to borrow less money, which will also lower your monthly payment.

It's a good idea to talk to a mortgage lender. You can usually find one, sometimes in house, through the realtor you’re working with. A lender can help you calculate your debt-to-income ratio and determine how much you can borrow. They can also help you find a mortgage that fits your budget, and if they’re in house expedite the buying process giving you a potential edge in the market. If you're still not sure how much house you can afford, or trust the lenders recommendations it's a good idea to talk to a financial advisor. They can help you create a budget and make sure that you're making a sound financial decision.

Here are a few additional tips for calculating how much house you can afford:

Consider your future plans. If you plan to have children in the next few years, you'll need to factor in the cost of childcare. If you plan to retire early, you'll need to factor in the cost of a reverse mortgage. this will also help you to determine if what you qualify for is really what you want to or should spend on a new home.

Get pre-approved for a mortgage. This will give you an idea of how much you can afford to borrow and will make the home buying process go more smoothly.

Consider the cost of living in the area you want to live in. The cost of housing, food, transportation, and other expenses can vary greatly from one area to another.

Spend money on a home inspection. This is an important step in the home buying process as it will help you identify potential problems with the property.

Be prepared to negotiate. The asking price is not always the final price. Be prepared to negotiate with the seller to get the best possible deal.

Don't rush into anything. Buying a home is a big decision. Take your time and make sure you are making the right choice for you and your family.

This obviously isn't a complete guide to detemining how much home you can afford, but I do hope it helps spark some ideas to get you on the right track. Thanks for reading!

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