Buying a home is exciting — but it’s also probably the biggest purchase you’ll ever make. If you don’t plan it right, you could end up “house poor,” stuck with a mortgage you can barely pay and no money left for anything else.
Here’s a simple, no-nonsense way to figure out what you can afford without getting in over your head.
1. Know your monthly take-home pay
Forget your salary “on paper.” What matters is what actually hits your bank account after taxes and deductions.
Example:
- Net salary: $2,500
- Extra income (side gigs, rental, etc.): $500
- Total monthly income: $3,000
2. Follow the 28% rule
Financial experts suggest your mortgage payment shouldn’t be more than 28% of your monthly take-home pay.
Using the example above:
- $3,000 × 0.28 = $840
That means your monthly payment (mortgage + interest + taxes + insurance) shouldn’t be more than $840.
3. Factor in other debt
Got a car loan? Credit cards? Student loans? Then you also need the 36% rule:
Your total monthly debt payments (including your mortgage) shouldn’t be more than 36% of your income.
Example:
- Income: $3,000
- Max total debt: $1,080
If you already owe $300 on other debts, your mortgage should be no more than $780.
4. Save for upfront costs
You’ll need:
- Down payment: usually 10–20% of the home price.
- Closing costs: about 3–5% of the price.
Example: For a $150,000 home:
- 20% down: $30,000
- 4% closing costs: $6,000
- Total upfront: $36,000
5. Don’t forget the hidden costs
- Maintenance and repairs
- Property taxes
- Homeowners insurance
- Utilities
Pro tip: Keep an emergency fund with at least 3–6 months of expenses so you’re covered when life happens.
💡Bottom line:
- Know your real (net) income.
- Keep your mortgage under 28% of it.
- Keep all debt under 36%.
- Save for your down payment and closing costs.
- Have an emergency cushion.
That way, you can buy a home and still have money left for, well… life.
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