Thinking of buying a house? Don't know how much should you spend on a house? Well the answer to that, like many other things is, it depends. There are no directives in figuring out how much to spend on a house or how big your mortgage should be because the way the mortgage lender computes your maximum purchase price will differ from how you would do it yourself.
Here are some methods to home affordability you should know.
The Use of DTI In Determining The Maximum Purchase Price
Whenever a mortgage lender determines the maximum home purchase price, it doesn't really account for the home's purchase price. Rather the lender bases it on the home buyer's expected loan size and the actual mortgage rates in finding the expected monthly payment. The mortgage lenders would then measure it up with the buyer's monthly income.
This method of comparison is called Debt-to-income Ratio, a.k.a., DTI.
Create a Monthly Budget
Of course, you can always rely on a bank to tell you how much should you spend on a house but banks usually approve you for a bigger home loan. This will be uncomfortable to pay later on.
Also, you won't be saving money when you use 45% of your gross monthly income is spent on using DTI.
So, the question should not be "how much to spend" but rather "how much would I like to spend on monthly payments on housing." Once you figure that out, find a maximum loan size that would fit your decision.
Now you know how much should you spend on a house, you can now go out go out there, find a house, and make it yours. You can also talk or consult with me by commenting bellow or contacting me through one of my social media sites.
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