Looking for a new house can be a great deal of fun. Today, more than 40% of home buyers begin their search for a new home or a second home online. While perusing real estate listings can be enjoyable and even exciting, there’s a risk of disappointment if you don’t know how much you can afford to spend on a new home. If you’re wondering “how much house can I afford?” keep reading. There are three key ways that you can determine how much you can spend on a home.

Using a Mortgage Calculator

You can determine a loose estimate of what you can afford by using a mortgage calculator However, this approximation should be confirmed by a mortgage advisor, as calculators will give you an estimate, but they are far from perfect. An online mortgage calculator will ask you to report your monthly earnings, the amount you plan to use for a down payment, and your monthly expenses (school loans, child support, alimony, car payments, credit card payments, etc.).

The benefit of using an online mortgage calculator includes giving you a very rough estimate of homes you may be able to afford. However, there are several downsides to relying on the results alone. Mortgage calculators often don’t ask for your credit score. They may pre-load interest rates that may not be current, and they may not account for all the monthly debts or expenses you may have. Take any answer you get from a mortgage calculator with a grain of salt.

Using the 28% Rule

Another way to find the answer to the question of how much home can I afford may be found by using the 28% rule. This rule is based on the theory that you should not spend more than 28% of your income on your house payment. It’s important to note that the answer will be presented as the amount you can afford to spend monthly, not the total price of the home. Here’s how to use the rule.

Start with your gross monthly income, and then multiply it by 28. For this example, we will use a gross monthly income of $8000.

8000 x 28 = 224,000

Then you’ll divide that answer by 100.

224,000/100 =$2,240 is the maximum you should spend on your mortgage payment.

The number you get also doesn’t answer the question, how much house can I afford? Instead, it provides you with the maximum amount you should spend on a mortgage payment each month. It will take additional calculations to figure out the total home price, if you’re paying $2200 a month, for thirty years.

Speaking with a Mortgage Advisor

The best way to learn what your accurate budget for a new home should be is to talk to a mortgage advisor. A mortgage advisor uses a variety of software, which considers more factors, before letting you know exactly how much house you can afford. Your mortgage advisor will also use current interest rates and adjust your down payment amount for a variety of different lenders. This yields a far more accurate answer to the question: how much house can I afford?

Another benefit of working with a mortgage broker to determine your house budget is that the service is free of charge. Mortgage advisors only get paid if they secure your home financing for you. Their fees will be included in your overall financing. So, it makes sense to take advantage of their free and accurate services.

Answering “How Much House Can I Afford?” with Our Team

If you’re looking to buy your first home, a new home, or a second home in Oregon, Strategic Mortgage Solutions can help. Our mortgage advisors are happy to help you determine how much house you can afford and to inform you of loan options that are available to you when you find the house you’d like to buy. There is no fee for our services until you’ve secured your home financing.

To speak with an experienced mortgage advisor today, send us a message or call 541-275-1148.