Making the decision to buy a home doesn’t come lightly. There are a lot of different factors that you must consider when making the decision. Knowing how much mortgage you can afford is the biggest and most important factor to consider. After all, nothing is more stressful than trying to pay a mortgage that you simply can’t afford.
If you are looking into buying a home, you are probably talking with an agent as well as family and friends. Most first time home buyers are under the impression that real estate agents will always keep their best interest at heart. While this can be true for several real estate agents, sadly it is not always the case…
One thing that you need to keep in mind is that real estate agents are paid on commission, so the higher priced house they sell the more money they make. As a result, they sometimes steer buyers towards higher priced houses to make more money on the sale.
So How Much Mortgage Can I Afford?
When trying to determine how much mortgage you can afford there are some general guidelines that you should follow, all of which involve some very basic math. The quickest way to determine a reasonable purchase price range for your home is to multiply your yearly salary by 3 to get the low end and by 4 to get the high end.
Once you get those numbers you will want to figure out what kind of mortgage payment you can afford each month. To determine how much of a mortgage you can afford, take your after-tax income and subtract all of your outstanding debts.
Once you have that number multiply it by 25%. This will give you the highest mortgage payment you can easily afford each month. You won’t want to go higher than that number, but you can always go lower. If you prefer typing in numbers, Zillow has an affordability calculator that lets you estimate how much you can afford on your next home.
Mortgage calculators are an easy and simple tool that you can use online to determine your monthly mortgage payments. This will help you ensure you are choosing a mortgage that you can actually afford. With mortgage calculators you simply input the amount of the mortgage, your interest rate, and the length of your mortgage. The best part about these calculators is you can play around with the terms to ensure you are choosing the best option for your financial situation.