How to know which house is affordable for you? (real estate, rent)

[VasylP]

Hi, everyone!How much house can I afford? This is probably first question, which arises for person who's thinking about buying property, especially first time.
It is a question for our family now
Although, there are different "affordability calculators" online, but I wouldn't trust them much, cause looks like they show raised numbers. Also, one thing I can't understand why it asks you about gross income, not after tax amount...?

So, I'll be glad to hear any thoughts from you guys right here, on this forum.

[Lookout Kid]

I think it's better to look at your monthly budget than the "affordability calculators". How much rent do you pay now? If you're comfortable increasing your housing payment, by how much? Then work backwards and figure out what your payment would be with current interest rates and the down payment you have available and the tax payment on the house. You'll also need to make some assumptions for insurance and maintenance. It gets tricky with property taxes, since they vary greatly. So you may be able to afford more house in a community with lower taxes.

[ToriaT]

Also keep in mind when you go to get qualified for a mortage sometimes they tell you you qualify for more than what you might be comfortable with. You have to look at other factors too.

[VasylP]

Talking about percentage from monthly income that will be used to pay off mortgage ( principal, interest, insurance, taxes), what should if be: 20, 25, 30, 35, 40% ?

[Lookout Kid]

I've heard 30% thrown out there before as a "rule of thumb", but like I said, it has more to do with what you can afford in your monthly budget. If you have two kids in daycare or student loans, you may not feel like you can afford that much of a housing payment.

What good does it do to have a mortgage at the maximum 30% if you can't really afford the payments due to other expenses in your life?

[JoePO]

Another factor to consider is that if you are renting now, you do not get either the mortgage interest or real estate tax deductions (assuming you itemize - you'll almost certainly want to if you have a mortgage). With these deductions in place, you could change your withholding allowances on your W-4s, and therefore get a bit more after-tax dollars every month, assuming you do not want to get a bigger (or any) refund at tax time. Those additional dollars can go towards paying a slightly higher mortgage than your current rent, or for taxes/insurance.