Staying Solvent: How Much House to Buy?

Aim to spend between 1/4 to 1/3 of your gross monthly income on your mortgage. It's unlikely any bank will give you a mortgage above that percentage, and if they did, you'd be eating mac & cheese five nights a week.

Use an affordability calculator to see what's possible given your salary, debts and expenses. If you can't get what you want:

• Consider less expensive homes
• Put off buying, reduce your expenditures and build your savings
• Reduce your debt

Make sure you consider:

• Closing costs Fees incurred in addition to the purchase price of a home that will be listed for both the buyer and the seller on the final settlement statement before closing. : Usually an additional 1% - 2% of the sales price –in cash.
• Annual property taxes The tax paid by homeowners to the government determined by an assessment. Homeowners pay this tax annually, semi-annually or as part of a monthly mortgage payment. : The combined city, county and state tax are usually about 1% - 2% of the assessed value.
• Homeowner's Insurance Insurance buyers need to purchase when they apply for a mortgage loan to guard against potential damages to their future home. : About $50 – 100 a month.
• Homeowners Association fees Fees paid by homeowners within a shared complex to pay for building repairs and operation costs. : HOA fees are about 0.1% of the sales price per month. Most condos An apartment you own, as opposed to rent. Condo developments are managed by a homeowner's association that collects monthly dues, maintains operations and enforces policy. have HOAs as well as some housing developments and townhouses.
• Upkeep: Expect to pay 1% - 3% of the home's value each year in repairs.

You don't need to spend as much as you can afford. Be deliberate when deciding how much home you want to own. Do you like to travel? Are you planning on having kids? Are you putting enough away for retirement? The more you spend on a home, the less you have to spend on other things.