how do you know how much you can spend on a house?
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To calculate 'how much house can I afford,' a good rule of thumb is using the 28%/36% rule, which states that you shouldn't spend more than 28% of your gross monthly income on home-related costs and 36% on total debts, including your mortgage, credit cards and other loans like auto and student loans.
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On average, the cost of a home appraisal on a single-family home ranges between $300 and $400. The price for an appraisal on a multi-family building starts around $600, but can increase depending on the size of the property.
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So, if you make $80,000 a year, you should be looking at homes priced between $240,000 to $320,000. You can further limit this range by figuring out a comfortable monthly mortgage payment. To do this, take your monthly after-tax income, subtract all current debt payments and then multiply that number by 25%.
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To calculate how much rent you can afford, we multiply your gross monthly income by 20%, 30% or 40%, based on how much you want to spend. You can use the slider to change the percentage of your income you want spend on housing.
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['Consider Extra Costs. An extra mortgage payment is already costly enough, but there are other factors to consider, like: ... ', 'Look at the Market. Where are you planning to buy your next home? ... ', 'Do the Down Payment Math. ... ', 'Browse Different Loans and Lenders.']
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How Long Will It Take to Save for a House? Saving 20% of your income could catapult you into purchasing a home in the next one to three years, depending on your market. For example, if you're earning $96,000 per year, that's $19,200 saved after one year. It's $38,400 after two years and $57,600 after three.
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For a rough estimate of your dwelling coverage amount, you can simply multiply the square footage of the home by the local rebuild cost per square foot. To find out the local rebuilt costs, contact an aforementioned professional in your area to help you out.
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['Check the Market.', 'Find Out How Much the Seller Paid.', 'Examine Comparable Sales.', 'Analyze List Price to Sales Price Ratios.', 'Check Square-Foot Cost Averages.', "Ask for the Home's History and Days on Market."]
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According to Zillow, closing costs will run you an extra 2% to 5% of the home purchase price. So if you're buying a $200,000 home, expect to spend between $4,000 and $10,000.
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The oldest rule of thumb says you can typically afford a home priced two to three times your gross income. So, if you earn $100,000, you can typically afford a home between $200,000 and $300,000.
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['See how much you can afford. The fastest way to get a sense of how much you can afford is with an online mortgage calculator. ... ', 'Get pre-approved. ... ', 'Attend open houses. ... ', 'Search homes for sale. ... ', 'Find a real estate agent. ... ', 'Make an offer. ... ', 'Inspect the home. ... ', 'Get the keys.']
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Probably the simplest way to find out how much is left on your mortgage is to check your mortgage statement. Look for an item labeled "principal balance." That's how much you actually owe, and the interest you pay is charged on that amount.
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Why it's smart to follow the 28/36% rule The 28/36 percent rule is the tried-and-true home affordability rule that establishes a baseline for what you can afford to pay every month. Example: To calculate how much 28 percent of your income is simply multiply 28 by your monthly income.
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['Determine How Much Home You Can Afford. ... ', 'Save For A Down Payment. ... ', 'Find A Real Estate Agent You Can Trust. ... ', 'Get A Mortgage Pre-Approval And Choose A Lender. ... ', 'Find The Perfect Home For You. ... ', 'Make A Smart Purchase Offer. ... ', 'Hire a Real Estate Attorney. ... ', 'Schedule a Home Inspection.']
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['Are you ready? Like having a baby, buying a house is also a pretty permanent thing in your life. ... ', 'How long do you plan to say here? ... ', "What's your budget? ... ", 'Where do you want to live? ... ', 'What do you want? ... ', 'Are you willing to renovate?']
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['Calculate your monthly income and debt.', 'Check your FICO Score.', 'Figure Out What You Can Afford as a Down Payment and for a Mortgage (Price Range).', 'Get Pre-approved for a mortgage, preferably a 15, 20 or 30 year fixed. ... ', 'Determine What You Need.']
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The first, and most obvious, decision point involves money. If you have sufficient means to purchase a house for cash, then you certainly can afford to buy one now. Even if you can't pay in cash, most experts would agree that you can afford the purchase if you can qualify for a mortgage on a new home.