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Donna Freda-Hertzog

Donna Freda-Hertzog

REALTOR
  • Phone: (484) 664-7423
  • Office: (610) 770-9000
  • Mobile: (610) 390-9611
  • Send Email

How Much House Can You 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:

   

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. An experienced real estate professional can assist you with this.

The data relating to real estate for sale or previously for sale on this web site comes in part from the Internet Data Exchange of the Greater Lehigh Valley REALTORS® Multiple Listing Service. Real Estate listings held by brokerage firms (licensees) other than RE/MAX Real Estate are marked with the IDX logo and detailed information about them includes the name of the listing brokers." "The information being provided is for consumers' personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing.

Information Deemed Reliable But Not Guaranteed.

Copyright © 2018. Greater Lehigh Valley REALTORS®. All rights reserved.


RE/MAX real estate - Allentown
3120 Hamilton Blvd
Allentown PA  18103
(610) 770-9000
Real Estate License # RS148139A
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