How to know how much house you can afford

Buying a house is an exciting event. Especially when it’s your first one. The downside of all that first-time buyer excitement is that it can sometimes lead people to overestimate how much house they can afford.

Though there is some wiggle room, most experts say that you should keep mortgage payments to under 28 percent of your gross income. That number can help prevent you from buying more homes than you can afford. Essentially, keeping your percentage low frees up money for other areas. Owning a nice, big home is cool. But it’s not so great if mortgage payments chew up all of your income each month.

This seems like a fairly obvious idea: Don’t spend too much on a house because you won’t have any money left over. However, according to a report from the National Association of Realtors (NAR), first-time home buyers are surpassing that number. By a lot. The study found that the average first-time home buyer is spending about 40 percent of their gross income on mortgage payments.

When shopping for a home, it’s important to avoid stretching yourself too thin. A nice home is great, but only if you can afford it.

Use this mortgage calculator to ensure that you can comfortably afford the home you’re considering.

When you are ready to buy, Fortera has a home loan to meet your needs. Visit our Home Loans page to learn more.

Original article by Chris O'Shea and adapted in partnership with SavvyMoney.