Can You Afford It?
February 1, 2010 by Rebecca
There are two main cost types when it comes to home ownership:
(1) One Time (down payment, closing costs)
(2) Recurring (principal, interest, taxes, insurance, HOA)
You have to look at both costs when determining what you can afford. The best affordability calculator I’ve found is at CNN Money:
The calculator asks for your gross income, current debt obligation, amount you’ve saved for a down payment, projected taxes and insurance. It then spits out the total home price and monthly payment amount in both conservative and aggressive scenarios.
If you’re currently paying off debt, play with the “monthly debt” field up top to see what would happen if you wait to pay off debt before buying a home.
Some caveats: The calculator does not factor in closing costs, PMI (which you’ll need to pay if you put down less than 20%), or Home Owner’s Association (HOA) dues. If you think you’ll be facing these costs, then be sure to add them in yourself. You could even add the monthly PMI and HOA costs to the “Homeowners Insurance” field (multiply the monthly cost by 12 first) to build it into the calculator.
At RSRE, we know how intimidating it can be to even consider buying a home, and we hope to help demystify the process, give helpful unbiased advice, and inspire you along the way. [
