Buying a home is no small decision. Model homes are fun to walk through, but first it is wise to evaluate how much house you can afford. For most, buying a home involves a 15-30 year commitment. Most experts typically say you should not plan on having a mortgage that is more than 25-40% of your income. It just depends on who you ask. I personally think 25% is safer. This would mean that if your household’s total income was say $4,000 you should try to make sure your monthly mortgage payment is no more than $1,000. It’s not like any one number can be taken as the gold standard, but this suggestion is to help people make sure they have enough money for all of their other expenses. Groceries, medical costs, car payments, student loans, insurance, and any number of things can really add up. You want to make sure that you’ll always be able to pay your mortgage so leaving 75% of your income for other expenses can help protect you.
Now let’s say you know you can afford $1,000/month for a mortgage, how much house can you afford if you are to stick to that budget? The main things to consider are your: down payment, likely interest rate (unless you know what interest rate you’ll get), and term length of your loan. Of course credit score, property taxes and other things will end up being a factor but the first three things will give you a good estimate of what you can afford. The bigger the down payment, the bigger the house you can afford. Same goes with a lower interest rate and a longer loan term. But, rather than give some complex formula you can follow this link to a calculator that will figure it out for you. Just put in your income, minimum monthly debt payments and then you can play around with interest rate and how much of your monthly income you want to put towards a house and it will tell you how much house you can afford.
Really this means almost everyone is “ready” to buy a house, it just depends on how much house you want. You can use these guidelines and online calculator to figure out when you think you’re ready to buy a home based on how big/nice a house you want. While you’re trying to figure out how much you can afford, we have many model homes listed on our model home locator. Go check out several different price ranges and you may be able to find a home you love at many different prices.