Want to know how much house can you afford? Try this one-minute trick
Last year was difficult for home buyers. The bidding wars have driven up home prices across the country, and the market is still full of competition. Before you throw your hat in the ring and start looking for a new home, you need to set yourself up for success by first finding out how much home you can afford.
This will help you build realistic expectations. Time is running out in real estate, and people are buying houses like hotcakes, so you can’t afford to waste a moment on a house that won’t fit. Tap or click here to access six online tools to help you on your home buying journey.
Luckily, there’s an easy way to find homes in your price range. You just have to follow the 28% rule. Here’s everything you need to know.
First, find your housing expenses
You can do this by calculating your debt-to-income ratio (DTI). This is a metric your bank uses to decide how much to lend you.
This measure compares your monthly debt to your pre-tax income each month. Your bank may qualify you for a higher ratio if you have an excellent credit rating. In most cases, however, your housing expenses should be no more than 28% of your monthly income.
So, calculating your DTI is a quick way to make your home buying journey easier. Once you’ve figured out what 28% of your monthly income is, you can filter out houses outside your price range.
If you don’t want to pull out a calculator and scribble down the numbers yourself, good news. Here’s a free calculator you can use instead, courtesy of NerdWallet. It looks like this:
As you can see, this helps you determine what you can afford based on the city in which you plan to buy a home. It’s quite comprehensive: you just need to select your credit level between low, average and good to excellent. You can enter more specific data, such as property taxes, home insurance, and HOA fees.
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Another free calculator
When it comes to free resources, you’re spoiled for choice. Like NerdWallet, The Penny Hoarder also offers a free online mortgage calculator. Tap or click here to start.
This free tool asks for your take-home pay, the size and terms of the loan you want, and a few other factors, like how much money you have available for a down payment. Once this information is entered, you can better predict property taxes, closing costs, and interest.
It’s a great way to prepare for the arduous process of buying a home. You will inform yourself in advance so as not to be surprised by hidden costs.
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Then see if there are ways to improve your existing home
Maybe you want to accumulate more money to increase your down payment for your new home. You may want to maximize your selling price when you put your current home on the market. One way to do this is to start a home improvement project.
Renovating your home with fancy upgrades can feel good when you’re selling. You can stop wondering how much house can you afford and start feeling more empowered when buying or selling your home.
When it comes to home improvement projects, just one application can make the whole process as easy as butter. Kim is a big fan of Angi, sponsor of its national radio show. This app connects you with highly skilled contractors nearby. You can read reviews from owners like you and use specific filters to find the best of the best.
Taking care of your home has never been easier. Get Angi, your home for everything at home. Download the free app today from Angi.com!