The first step in this entire process is determining whether buying or continuing to rent makes more sense for you. (There’s a calculator for this.)
If the decision is to buy, your next step is determining how much you should spend. There are varying opinions on how to calculate this, but here’s a good rule of thumb for dividing up your monthly income:
36% should go toward paying debts.
For a mortgage specifically, it is often suggested to stick with no more than 28% and leave the remaining 8% for other debt.
31% goes toward taxes.
Based on the national average.
33% covers everything else.
This includes things such as daily needs, entertainment, vacations, and investments.
You also need to take other home ownership costs into consideration such as down payments, PMI, homeowner’s insurance, utilities, and ongoing upkeep.
The next step is to get prequalified for a home loan. This will help you determine how much you can borrow.
Get Prequalified Now