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How Much House Can You Really Afford???

August 23rd, 2019

Are you thinking about buying a house? Is it the right time or can you really afford it?

Here are 3 tips to help you decide, by Real Estate Investing:

(A) 28/36 Rule

(B) 30% Solution

(C) 25% Method allocated by Dave Ramsey

Both (A) and (B) refers to your Gross Income and (C) refers to your Take-Home Pay.

I will only touch a little bit on (A), the 28/36 Rule. This rule suggest that you

spend no more than 28% of your Gross Income on your "Mortgage Payments;" 

for example: Principal, Interest, Insurance, Property Taxes, PMI (if you have any),

HOA, and related costs. As for the 36%, no more than that should be spent on 

those housing costs and other debts.

After watching the short video link above, you then try this Rule and you are realizing that

you have too large of a debt to pay that does not include Mortgage Payments; then you 

might want to re-think this idea of purchasing a home at this time. You will end up broke and 

possibly not able to pay your debts and Mortgage Payments in a timely manner. You could 

lose the home, go into foreclosure or many other issues that could arise that puts you in a

hole that you may not be able to climb out of. Remember that a home is the biggest 

purchase you will ever make in your life. 

On the flip side I would suggest trying all 3 tips, A, B, and C. See which tip could possibly

work for you. Then, if your still not sure what approach to take and you really want a home,

then I would encourage you to get a Financial Advisor recommendation from family,

friends, or coworkers to help you. Everyone's situation, life style, and family income is different.

Ones personal budget may work for them but not for someone else because their situation, life

style, and family income is different than the others.

As for my husband and I, years ago we used the 25% Method; that was allocated by Dave Ramsey.

That is what worked best for us at that time.  

Remember the expression, "Live Within Your Means." Meaning, if your approved for a home that is

$300,000, $700,000, or 1,000,000, are you going to purchase a home for that exact amount? NO

Unfortunately, most do and do not do the math or they do not have the right education of how to go about

it without being broke. This amount is only what your approved for and not to purchase a home for that

amount; purchase a home under that amount. Once you do the math of your Take-Home Pay, only

25% should go towards your housing costs; (C) 25% Method. Only live within your means and what you

can afford when purchasing a home. If it is a Buyers Market, you can get more quality of a home (more bang

for your buck); for less money.

Hope my blog today was helpful to everyone. I encourage all to watch the short video link above; and like

share, or subscribe through my Facebook Page! :-)

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Disclaimer : The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the Houston Association of REALTORS®

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