Usually, when you’re looking to buy your first house, or any house for that matter, you inevitably consider the question:
What can I/we afford?
So, how can affordable housing be defined? The following paragraphs will provide several examples of how to use your income and your projected income to decide what house is best for you and for your bank account.
What Can You Afford?
First of all, affordable housing relies on 3 things: the size of the family that will be living in the domicile, the total income of this family that will be able to be used to pay off the mortgage, and the potential selling price of the house. You must always keep these 3 elements in mind when considering buying. This article is aimed primarily at addressing the first issue.
As a very rough estimate, the monthly mortgage should be equivalent to no more than 30% of the combined monthly income of the people responsible for paying for the mortgage. This means that if two individuals are considering buying a house, and their combined income is about 7,000 dollars per month, then their monthly payments for the mortgage should be no more than roughly 2,100 dollars.
This way, you can be assured that your family and you will have enough money to pay off the mortgage, to pay for food and to still have money leftover in case of emergency or in case you wish to take a vacation.
As another general rule, if you are three individuals buying a two-bedroom house, as is the case with most beginning families, and if you apply to the moderate income (between 40,000 – 45,000 dollars per year) of America which applies to about 60%-80% of the population, you should aim for buying a house valued at between roughly 100,000 to 130,000 dollars. This way you can be sure to be capable of paying off your mortgage at a comfortable pace.
Rent vs Buy
If you decide to rent a home or an apartment, you should follow these general guidelines to make sure you are capable of comfortably making payments. Once again, this is assuming that you are 3 individuals searching for a 2 bedroom housing unit, and assuming that you fall in the category of moderate income individuals. If you meet these specifications, you should aim at paying a monthly rate of about 750 dollars for your rent. This will ensure that you can live happily and still afford small luxuries such as vacations every so often.
All in all, affordable housing can sometimes prove to be an ambiguous subject. But if you follow these guidelines, you are sure to find housing that meets your needs and does not cause you any grief or financial problems.