The costs of homeownership are rising again. Can you afford a house today?

0

It’s no secret that house prices have skyrocketed over the past year. Low mortgage rates and limited inventory have fueled an increase in demand, and now many buyers are struggling to find properties that fit their budget.

But it’s not just that homes have become more expensive to buy. They have also become more expensive to own.

The monthly mortgage payment you submit each month is only a portion of the total homeownership expenses you will incur. You will also have to deal with property taxes (which can increase over time), home insurance, maintenance and repairs.

In fact, according to ATTOM’s latest housing affordability report in the United States, during the third quarter of 2021, median-priced single-family homes were less affordable compared to historical averages in 75% of counties nationwide. . This is an increase from 56% of counties in the third quarter of 2020.

6 simple tips to get a 1.75% mortgage rate

Secure access to The Ascent’s free guide on how to get the lowest mortgage rate when buying your new home or refinancing. Rates are still at their lowest for decades, so act today to avoid missing out.

By submitting your email address, you consent to our sending you money advice as well as products and services which we believe may be of interest to you. You can unsubscribe anytime. Please read our privacy statement and terms and conditions.

Can you afford to own a home today?

You might be able to buy a home because you’ve saved enough down payment to qualify for a mortgage. But does that mean you can actually afford one? Not necessarily.

Depending on where you buy and the type of home you buy, you may find that your total expenses are much more than just your mortgage payment. And that could, in turn, make home ownership unaffordable for you.

The 30% rule

As a general rule, you should not spend more than 30% of your net salary on housing. And by “housing” we mean your predictable monthly expenses. These include:

You will notice that maintenance and repairs were not on the above list. These are always expenses that you will have to grapple with, but because they are not pre-defined, they do not necessarily have to count towards that 30% threshold. However, to better protect your finances, you may want to try to estimate these costs and include them in that 30%.

What happens if you spend more than 30% of your income on housing? You can land in a position where you fall behind on other bills, forcing you to rack up unhealthy debt.

Now there is some leeway with this guideline of 30%. If you are moving to a city where you can get by on cheap public transport and therefore do not need to own a car, you can probably spend over 35-40% of your income on housing while staying well. This is because you will save a lot of money by not having a vehicle to pay for and maintain.

But for the most part, it’s good to stick to that 30% limit. So when you start looking for a home to buy, don’t just focus on the price of that property and the resulting mortgage payment. Rather, look at the big picture and make sure the house is affordable after you factor in all of the costs involved.


Source link

Leave A Reply

Your email address will not be published.