How Much Home Can You Truly Afford? How Much Home Can You Truly Afford?

How Much Home Can You Truly Afford?

Monday, December 10, 2018

Purchasing a new home is an exciting time in life. It is a goal that many individuals spend years trying to achieve. However, by purchasing a home that is out of your budget or rushing into the home-buying process too quickly, you may find yourself in financial trouble. But, how do you know how much home you can actually afford? Let’s take a look.

Determine Your Combined Monthly Income

One of the most important steps you will take before you begin looking at homes is to know your combined household income. Know how much money you and your spouse bring in every single month. This number is your base number and will be used for many different aspects of the home-buying journey from determining how much you can afford to your eligibility for a mortgage.

Learn the 28% Rule

The 28% Rule states that you should not pay more than 28% of your combined monthly income on your mortgage and homeowner costs such as utilities, insurance, taxes, etc. Additionally, keep in mind that if you are not paying the full 20% down payment, you should factor in a PMI each month as well.

Because you won’t know the exact cost for homeownership each month, determine 20% to 25% of your monthly income and do not purchase a home where your monthly mortgage payment will be greater. In Miami, the average income is $52,300. This means that you want to keep your monthly mortgage payment between $870 and $1089.

By being more considerate with your home purchase, you will have less financial strain and feel more comfortable with your personal finances.

Use an Online Calculator

Every family’s financial situation is different. Many individuals live more comfortably and have less debt, while others are living paycheck to paycheck. To help you determine your own personal situation and how much house you can afford, there are many online calculators and tools. Many online calculators ask you to enter specific information to get a more accurate estimate for your own circumstance. A few online calculators you may consider include:

Bankrate

SmartAsset

NerdWallet

Zillow

Talk to a Lender

The more accurate and efficient way to determine just how much home you can afford is to speak with a lender. There are many factors that will determine your mortgage payment and the amount of house you can afford including your down payment, credit score, monthly income, debt-to-income ratio, and more. A lender can look at all the pieces to help you determine if purchasing a home is in your near future.

Once you have determined just how much house you can afford, contact Miami real estate agent Carla Oliva at Global Life Realty. She can help you find a Miami dream home that falls within your budget.

 
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