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Your Affordability Number Explained

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Buying a house of your dream? Don’t know where to start? The first question that comes to your mind when making this purchase decision is how much you can really afford. To answer this question, you need to do some homework. Most people who are looking to purchase a home may have already know how much they can spend and what neighborhood they want to live in. Certain amenities like good schools, proximity to workplace, school, relatives and so on have already been known. All these knowledge comes with a fabulous result in the end even though it may seem treacherous in the beginning. Note that what you can afford can be a number that is entirely different than what your real estate agent, financial adviser or salesperson is suggesting. This number is more realistic than the numbers they estimated for sure.

So, in order to figure out your affordability number, examine carefully about what you spend on every month and how much money can be saved. Gather your credit card statements, make a list of items you paid through cash, and collect all your check registers in one place. Calculate your monthly take home pay and deduct the total spending from it. This number is what you can save for your future home to pay toward mortgage and bills that come with it. Then, think about how your finances might change in the future. Are you nearing retirement? Are your kids in college? Will you hold on to the job for many years? Are you able to cut down on certain expense? The answers to the above questions are very crucial in making the final decision of purchasing your dream home in a desired neighborhood.

You may notice that you have been buying too many takeout dinners in your current apartment. Cooking at home is the money saved towards your new mortgage. Or your new home is in an upscale neighborhood and so you are expected to keep the house to a certain standard inside and out. You may need new furniture, participate in community gatherings, entertain neighbors, celebrate special occasions and holidays, and maintain the peace and tranquility of the neighborhood.

There can always be additional expenses once you buy a home. Most homes need regular necessities and maintenance such as lawn care, pest control, HOA fees, house repairs, additional utilities in common areas and painting. Then there are taxes and insurance that vary widely each year depending on the state, home valuation, upgrades, management fees from service providers like property management Apex NC if applicable and much else.

After you gather all the data, convert it into the number you are looking for which will determine the maximum amount of mortgage you are able to pay. Roughly, this number is the sum of your take home pay minus the living expense mentioned earlier. The amount that you came up with this calculation is also the maximum dollars you can pay towards your house payment and all other expense.

 

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