How can you determine how much home you should purchase? Is it just the amount your lender can approve you for? Should you just go by your current monthly rent payment and calculate it from there? Most experts say that your house payment should not exceed more than 28% of your gross monthly income. So, if you make $5000 and your spouse or significant other makes $3000 then you would not want a payment more than $8000 x 28% or $2240. The question is, how much of a home would that be? Below is a simple matrix that shows you based on your income how much of a home you should be looking for:
|Gross Monthly Income||28% payment||Purchase Price|
Keep in mind that this is a guideline and not a hard and fast rule. Lenders can typically approve a payment as high as 50% of your monthly income, so just be sure to know your budget and what you can be comfortable with. You don’t necessarily want to max out what you’re approved for.