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How big of a mortgage
can you really afford?

Maybe you are ready to start that “adult” part of your life, looking to upgrade, or are simply refinancing, but whatever the reason, it is important to know exactly how much home you can really afford.

 

Unfortunately (or fortunately depending on your point of view!), it probably isn’t that big number your real estate agent or bank pre-approval told you, if you got that far already.

How Much Home Can I Afford Calculator

The Rule

According to almost anyone you ask in real estate or finance, the safe landing spot for your new home’s expenses should be at or below 28% of your monthly take home pay. Those expenses should include mortgage, insurance, taxes, and any possible applicable HOA fees. This number is certainly getting more unattainable through rising rent and spiking housing costs, so it is becoming more routine to see the figure creeping closer to 50% of take home pay, but the goal should still be to stay as close to 28% as possible. 

The Math

We will have an interactive calculator for you soon, but until then, here are some examples based on take home income and average escrow costs for property taxes, homeowners insurance and mortgage interest rate.

$80,000 HH Income

Take Home Income: $3,592

Maximum Mortgage: $704

Down Payment (20%): $35,000

$175,000 Max Home Price
$250,000 HH Income

Take Home Income: $12,375

Maximum Mortgage: $2,425

Down Payment (20%): $120,000

$600,000 Max Home Price
$150,000 HH Income

Take Home Income: $7,210

Maximum Mortgage: $1,415

Down Payment (20%): $70,000

$350,000 Max Home Price
$300,000 HH Income

Take Home Income: $14,892

Maximum Mortgage: $2,920

Down Payment (20%): $146,000

$730,000 Max Home Price
$200,000 HH Income

Take Home Income: $9,788

Maximum Mortgage: $1,920

Down Payment (20%): $96,000

$480,000 Max Home Price
$500,000 HH Income

Take Home Income: $21,200

Maximum Mortgage: $4,150

Down Payment (20%): $200,000

$1,000,000 Max Home Price

So... How much should you be spending on your home?

Fill in the values with your own take home pay, as well as estimated insurance and taxes in the area you are looking to help determine just how much home you can comfortably afford. There are plenty of real estate sites out there that have a full history of the property taxes and average insurance rates for any house you are looking at.

Additional Resources:

Down Payment Planner

Simple steps to help you save up for a down payment. 

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ROI or Return on Investment can mean different things to different people. Let's look at the most rewarding DIY projects. 

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