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How To Work Out A Monthly Mortgage You Can Live With

Most Americans have trouble budgeting and have to work harder when buying a home than other developed countries.  This problem means that many don’t know how much they can afford when purchasing a home, and often resort to guesswork or hiring a professional to tell them what to do.

Instead, here’s a four-step way to calculate how much house you can afford without having to end up house poor!

How Much Do You Make A Month

This concern is a simple question, but you have to consider how much the actual number is.  Don’t try to pad your income so that it looks like you make more and can then possibly get a more expensive home.  Instead, be honest, and look at every source of income you have.  If you have a part-time gig if you get child support, if you make money streaming on Twitch, whatever it is- try to break down how much you make in a year from each of these, and then divide that by twelve.

How Much Do You Spend A Month

Much like figuring out how much you make, it’s vital, to be honest with how much you spend.  If you order in a lot of food now, chances are, you’ll still want to do that when you own a home.  Look at all of your expenses in an average month that doesn’t have to do with your living situation.  So, cable, internet, ar, and insurance are things you can factor in- but leave out your rent, electricity, and apartment insurance.  This work will let you have a clear view of how much money you have after general costs.

Expenses of Owning A Home

Unfortunately, the act of buying a home doesn’t mean that all you’ll have to pay for is the home.  Homeownership has its costs as well.  There’s the mortgage, lights, house insurance, property taxes, homeowners’ association, upkeep, and updates you’ll need to do on your home.  Look at all of this, and consider how much will be left on average at the end of the month.  Although the idea of a $500 mortgage may seem nice, with all of the fees and costs on top of it, that price per month could double before you even realize it.

Work With What’s Left

Subtract your monthly expenses from your income, and give yourself a little wiggle room.  A couple of hundred dollars a month for fun, a couple hundred for savings, and a couple hundred to go into an emergency fund are more than enough.  The leftover amount is how much you can afford per month.  If you want a ten-year mortgage, multiply that amount by 120; for a three-year mortgage, multiply it by 360, and that’s roughly how much house you can afford.  Of course, this will change based on how large your down payment is and what your interest rate looks like, but it’s a more transparent view of what you may be able to afford.