Housing payments are relentless. Month-after-month, monies
are due -- no matter what. When you make your housing
budget, therefore, think in terms of monthly obligations.
"What can I afford to spend on housing each month?"
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As a homebuyer, itâ€™s the most important question you can ask
yourself. And ranges wonâ€™t do, either. Find your specific number.
Once you know your monthly budget, determining whether a
home is â€œaffordableâ€ for you is a matter of working some basic
mortgage math. Youâ€™ll need a mortgage calculator for this step.
First, sum the following three figures:
The homeâ€™s annual real estate tax bill, divided by 12.
The homeâ€™s estimated annual cost to insure, divided by 12.
Your insurance agent can help determine this number.
The homeâ€™s monthly dues, if an association is present.
Next, subtract this sum from your monthly budget amount and
youâ€™re left with your maximum monthly mortgage payment.
Example: If your budget is $1,500 and the above sum is $400,
you have $1,100 left monthly to spend on your mortgage.
This next step is tricky.
Using your mortgage calculator, enter your maximum payment
amount (e.g., $1,100), your loanâ€™s expected term (e.g., 30
years), and your expected interest rate (e.g., 4.750%).
Then, have the calculator solve for â€œloan sizeâ€, add to that figure
your expected downpayment amount, and -- voila -- youâ€™ve
found the maximum price you can pay for a given home while
still remaining within your budget.Â
Debra McAlister-Brown, P.A.
Florida Home Realty
Broker / Associate
Luxury Homes Consultant
Multi-Million Dollar Real Estate Producer