Personal Budget Training: Housing Prices

Thursday, June 26, 2008

Housing Prices

How much should afford as opposed to how much can you afford?

With great mortgage rates and a plethora of foreclosures, it's almost too good to pass up on this deal. The possibility of getting your dream home may have some people in over their heads, so how much should you afford?

In a perfect world: Whatever house you can pay cash.

Realistic: If you have to, finance on a 15 yr fixed mortgage where the payment (PITI) is no more than 25% of your take home income. The monthly payment, including principle and interest, taxes, insurance, and association fees if necessary, should not be more than 25% of your take home pay on a 15 year fixed interest rate mortgage.

Example: If you make $100K a year, which would be around $75K after taxes, or $6,250 a month. So 25% of that is 1560.

Also, you should consider the size of the house that fits into your budget. How much of a house do you really need?

Labels: Budget, Mortgages