A beautiful house is the dream of everyone. Everyone wants to have a house which contains all the facilities and an amazing view. No doubt that our homes say a lot about who we are and what we think about life. It is also a fact that you always purchase a house which is affordable to your pocket.
Rules of Thumb for Home Affordability
While purchasing a house, you should be more realistic. Rough estimates to know how much house you can afford are fairly easy to determine. But a few lender guidelines can help you make a pretty accurate guess regarding what’s affordable and what’s not.
There are few rules of thumb regarding home affordability:
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Choose a total payment that is close to what you spend now for rent
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Always select your maximum home price at three times your annual income
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Always choose a total housing payment that does not exceed one-third of your before-tax income
How Much House You Can Afford?
Everyone’s idea of a dream house may be different, but since money is an object for all of us, these aspirations should be toned down accordingly. If you have finally decided to buy a house, make sure you choose the one that you can afford. I must say that one of the major mistakes first-time home buyer usually makes is buying a home more than he or she can afford.
To help you figure out what price range you should be considering, you should consult with a personal finance officer. He can create chart that contains details how much house you afford. Your finance officer will make a decision based on your annual income.
Let’s assume a saving rate of 25% of annual pre-tax income of Rs 8 lakhs and 10% expected return on savings. The savings usually depends on the type of house and city you want to live in. few cities required a saving time of 5.6 years while some required a time of 6.2 years. You can also use an online home affordability calculator to get better results.
How Can You Increase Your Home Buying Power?
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Cut Your Monthly Bills
Cut them. Always check how each debt can be reduced, so that you can save more money for your house.
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Borrow Less
If you want to purchase a house, you must try to borrow less. Always buy a less expensive property so that you do not have to borrow an amount from anyone.
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Consider A VA Loan
You can consider a VA loan or mortgage loan. If you are VA qualified, there is no front ratio in this loan. In other words, if you have no recurring debts, your housing can use 41 percent of your gross monthly income
Bottom Line
A home is a valuable asset for you. It’s important to look at your monthly income and figure out ways to eliminate those payments as you start thinking about buying a house.
