Client-Focused Representation In Real Estate Matters

What portion of your budget should go to your home?

On Behalf of | Feb 10, 2022 | Residential Real Estate |

When you’re buying a home with a mortgage loan, you’re usually not thinking as much about the total cost. You don’t have to come up with all that money. Instead, you’re thinking about how the monthly payment is going to fit into your budget.

From this perspective, what percentage of your budget should you allot to those mortgage payments? While everyone has to make their own decision on what they feel comfortable with, there are some rules of thumb that are worth considering – especially if this is your first home.

The 30% rule

One common rule that is used is to look at the total amount of money you make in a given month, without removing the taxes, and then to spend no more than 30% of that money on housing. If you are earning $6,000 a month, your housing shouldn’t cost more than roughly $1,800.

One thing to remember is that that $1,800 should be more than just your mortgage payment. You also have to pay or escrow for property taxes and home insurance. Additionally, many people include utilities and maintenance in this 30%. For example, your mortgage itself may cost $1,200, your insurance could cost another two hundred, you may need to set aside $200 more for taxes, and then you may need a few hundred dollars every month for utilities. If your actual mortgage payment is $1,800, then you are going to well exceed that 30% total.

As you work your way toward homeownership, no matter how much it’s going to cost, be sure you know exactly what steps to take with this large investment.