Calculating how much house you can afford is not an easy task, but we will make it simple for you. To start off, you first need to know that buying a new home should provide you with a sense of financial security and stability. Do not let the excitement blind you. Breaking the bank can give you a nightmare scenario. It sucks when you live with barely enough income to meet your day-to-day expenses. Do not put your family through this. There is also the threat of foreclosure looming if you trail on the payments which can give you and your loved one's sleepless nights. That’s not the kind of excitement you want.
Use the 36% rule which states that your total debt payments should not amount to over 36% of your gross income. This means for every pre-tax dollar, you earn monthly, you should NOT dedicate more than 36 cents to paying off debt. Including but not limited to your student loans, mortgage or credit card debt. Also consider expenses like utilities, repairs, home insurance and property taxes. To avoid future embarrassments and monetary constraints, ask yourself this question; how much home can I afford?