There is a vague way and a concrete way to figure out what price house you can afford. Mortgage brokers use the vague way and here it is: They say you can afford a house if the monthly payments make up no more than 33-percent of your income. During the housing bubble they used more extreme percentages, like the using payments could be 45 percent of your income! But I don’t like that method because it’s theoretical instead of real- life. Here’s my concrete method: you will KNOW you can afford a house if you buy one with a monthly mortgage payment that is the same as your rent payment! Because you’re already affording that! This sometimes means saving up a larger down payment, which I think is healthy. I created a calculator that tells you what price home you can afford based on your current monthly rent. Here’s an example: If your rent is $2000 a month and you put 20% down, you can buy a home that costs $420,000 and your mortgage payment will also be $2000 a month. Here’s my one-of- a-kind calculator that tells you what price home you can afford based on your current rent payment.
**NOTE: You can access this calculator using Chrome, Firefox, or Internet Explorer, but NOT Safari. It also requires Flash. If you are not able to use it, please email me via the contact page with how much you currently pay in rent and I will run the numbers for you. How’s THAT for personal attention?! 🙂 Elisabeth
