How Much Can I Spend On a Home?

In your mind you want to buy a home. Now what? For starters, you have to figure out how much you can spend on the place.

It has been said that you should spend no more than 28% of your monthly income on a mortgage. So, in a simple math example, if you were making $1,000 a month, $280 or less of that should go toward “paying off the mortgage.” Keep in mind, too, that there are associated costs with buying a home, such as closing costs and legal fees, which tend to add on an additional 3% to the purchase price. Like with most “big purchases,” you should always plan to have to pay “a little extra.”

When deciding to buy a house and figuring out how much to spend, there are a number of factors involved. Generally, it comes down to “the market” and “your bank account.” With the market, take a look around at neighborhoods you’d consider to be in the price range you’d like to pay. A home in East Amherst, for example, is probably going to cost more than a home in Depew. You’ll want to explore areas pertaining to their quality of schools, crime stats, amenities and more. When looking at a map, you can circle places you think you’d be comfortable living in that also happen to be places you think you could afford. Next, consider your bank account. How much money have you saved up for the big purchase? Do you have a steady income for the foreseeable future? Ideally, you want to find a house that makes sense for your current financial situation, in an area where you’d like to live.

For those of you who like to “do the math,” take your annual salary and multiply it by either 3 or 4 to give you an idea of the price(s) of homes you should consider. For example, if you make $50,000 a year, multiply that by 3 and you’d be looking to buy a house for $150,000. You can also think of the cost as “how much per month will I be paying for this?” In order to find that number, use your monthly after-tax income figure and subtract your current debt payments. Then, multiply that number by 25% to find out what you truly can afford to pay on a monthly basis for your new home.

If you need help determining the right Western New York houses for your budget, contact Donna Littlefield today.