How Much Home Can You Comfortably Afford?

Before you take the leap to buy a house, make sure you carefully think through how much home you can comfortably afford. The key word here is “comfortably”. Having a mortgage that weighs you down every month is never a good situation.

The first step (if you haven’t done so already) is to create a budget. This will help you to determine where a mortgage payment will realistically fit in. Instead of focusing on how much money the bank will let you borrow, determine how big a mortgage you can comfortably take on without putting any other financial plans on hold.

A good rule of thumb is to start with whatever you make each month (before taxes), and multiply that by 28%. This will likely provide you with a manageable monthly mortgage figure. (Look for online tools that can help make this calculation easier for you.)

Once you’ve determined what you can realistically afford, try the payment on for size by starting with what you’re already paying for rent, and setting aside any additional money you’d need to make the mortgage payment (factoring in principal, interest, taxes, insurance, and additional costs). If, after a few months, this still feels like a comfortable payment, you’ll have a better idea of what you’re in for once you do buy your home.

About cozbycpa

Heather L. Cozby is a CPA on the South Shore and Cape Cod. The managing partner of Cozby & Company, LLC, Heather has the resources and experience necessary to provide quality professional services on a timely basis and at a reasonable cost. She specializes in tax planning & preparation; audit, review & compilation services; management advisory services; bookkeeping; and accounting. Her unique niche is in working with homeowners’ associations and condominium trusts, advising with rental real estate, and providing outsourced financial consulting for mid-sized companies. She is more entrepreneurial than most accountants, and offers the best of both worlds - providing the services of a larger firm while retaining the ability to connect with her clients on a personal level.
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