Can I afford to Build a house?
Figuring out how much house you can afford doesn't have to be rocket science. These home affordability questions can help you buy a home in your budget. If you can’t say yes to all six questions, it’s best to put your home purchase on hold.
- Am I debt-free with three to six months of expenses in an emergency fund?
- Can I make at least a 10% (preferably a 20%) down payment?
- Do I have enough cash to cover closing costs and moving expenses?
- Is the house payment 25% or less of my monthly take-home pay?
- Can I afford to take out a 15-year fixed-rate loan?
- Can I afford ongoing maintenance and utilities for this home?
Let’s dig a little deeper to see how three simple steps can help you answer the question you’re really dying to know: “How much house can I afford?”
Step 1: Start With a Solid Foundation
Too many people go broke buying a home because they think it’s the grown-up thing to do, without considering how much house they can actually afford. The house you buy has to match your financial situation. Life events—like getting married or having a baby—aren’t reasons alone to buy a home. The time is right when the money’s right. Nothing can sour your dream of home ownership quicker than a major disaster you don’t have the cash to cover. That’s why we recommend being debt-free with three to six months of expenses in an emergency fund before you buy a home. Just married? Wait at least a year before buying a home. Don’t add the stress of a home purchase to a brand-new marriage, and never buy real estate with anyone you’re not married to.
Step 2: Maximize Your Down Payment
The best way to buy a home is with 100% down. Paying cash for a home may sound weird, but imagine all the fun you could have without a mortgage payment weighing you down!