Looking for a house takes time. Most likely you won’t be able to buy the one that you fall in love with because of the price. Even if you make enough for the house payment, there are other things you need to consider when buying a house. For example, owning a house is expensive. Not only do you have to make your monthly payments, but you also have to make sure the house doesn’t fall apart around you. Houses take a lot of upkeep, so factor that in when figuring out how much how you can afford.
How much should your mortgage payment be?
On principle, your mortgage payment should be no more than 25% of your take-home pay. Keep in mind that you’ll have to pay property taxes and insurance. Most of the time your mortgage company will add these into your monthly payments.
If you buy a house that you can’t truly afford you risk the dangers of not having enough money for anything else. So how much is too much for a house? If you’re at risk for the following danger signs, then consider buying a house at a lower price tag.
- You Can’t Do Anything
- Constant Paranoia
- You Get Sick
- No Room for Savings
You may live in a nice home but you can’t afford to do anything but sit in there and do nothing. You still want to be able to live your life, have some spare money for entertainment, and be able to go out with your friends.
If you’re barely making your mortgage payments and suddenly you get a pay cut or even fired, then what do you do? You need to have some wiggle room so if something like that happens, you’ll still be able to make the payments.
If you suddenly get sick or are injured and need to have surgery or are hospitalized, you need to be able to make those payments. Medical bills can come on suddenly and usually aren’t cheap. So make sure you have spare money you can set aside for times like these.
If all your money is going towards your mortgage payment, then you won’t have anything to put into savings. You need to have a little extra money to set aside for retirement, kid’s college tuition, or an emergency fund.