How Much Can I Afford?
Knowing how much you can afford to pay is a crucial step in your search. Nailing down your budget early will make the overall process more focused and less stressful.
Here’s a good way to figure out how much you can afford:
The 28/36 Rule
The 28/36 rule is an established benchmark used by many lenders to determine how much credit to offer you. Here's how it works:
Get preapproved for a mortgage. Your lender can approve you for a certain to loan amount prior to your home search. This gives you a solid number against which you can assess the affordability of the houses you visit.
The "28" refers to the notion that no more than 28 percent of your gross monthly household income should go toward housing costs, which include mortgage principal, interest, taxes and insurance.
To calculate, simply multiply your gross monthly income (amount before taxes) by .28. Use this amount as a guide for how much house you can afford.
Example: You earn an annual salary of $70,000. Divide 70,000 by 12, giving you a monthly gross income of $5,833. Multiply that by .28, and you'll find you should spend no more than $1,633 each month on total housing costs.
The "36" part of the 28/36 rule refers to your overall debt, which shouldn't exceed 36 percent of your income. This is important to consider because other high monthly debt loads – such as car and credit card payments – impact the amount you can afford to spend on housing.
For first-time home buyers, the tricky part is knowing how much to budget for taxes and insurance. Your agent can assist you with this.
Get In Touch
Local Expert Updates
Matt Rogers
Cell: 712.330.0604
Janie Gilmore
Cell: 712.339.0574
Aaron Jones
Cell: 234.234.2342Community Updates
Woody's Pizza
Woodys Pizza is the oldest existing pizza restaurant in Northwest Iowa. In 1961, Woody and Mae Condon started their first restaurant in Estherville, with four tables, an eight seat counter and carry-out service. There was no alcohol served. It became a gathering place for the young people of Estherville.
In 1980 they sold their restaurant to th... Show More
Jimmy John's
Jimmy John's slices our all-natural meats and fresh veggies in-house every day. Our fresh-baked bread is made right here where you can see it, and our house-made tuna salad is fresh every day. The flavor of a ripe tomato, crisp shredded lettuce, combined with fresh-baked bread, fresh-sliced meat and real Hellmann's mayo - that's when the magic happ... Show More
Ace Hardware
As your local Ace Hardware, we are one of 5,000+ Ace stores locally owned and operated across the globe. But we are not just about numbers. We are about helping neighbors, because each one of our stores is a part of your community. We are all committed to being "the Helpful Place" by offering our customers personal service, quality products and a c... Show More
