Figuring out how much house you can afford can be one of the most frustrating steps in the home-buying process. But it’s crucial to know how much house you can afford before you start the searching process to ensure you are looking at homes that fit both your needs and your financial capabilities. Follow these simple steps to determine how much home you can afford.
1. Determine your take-home pay.
In order to figure out how much house you can afford, start by adding up your monthly income. Be sure to include your spouse’s income in this figuring. Do not include side jobs/gigs, as these are unpredictable sources of income.
2. Calculate maximum mortgage payment.
Next, use the take-home pay figure you just got and multiply it by .25 (25%) to get the maximum amount you will be able to afford to pay per month on your mortgage.
3. Estimate your monthly payments using our mortgage calculator.
While it’s difficult to determine down to the penny how much your mortgage payment will be each month, you can get a good ballpark estimate using our helpful mortgage calculator. Simply plug in the total amount, down payment, interest rate, amortization period and payment period, and our mortgage calculator will do the rest!