sellboji

How Much Can I Afford?

Knowing how much you can afford to pay is a crucial step in your search. Nailing down your budget early will make the overall process more focused and less stressful.

Here’s a good way to figure out how much you can afford:

The 28/36 Rule

The 28/36 rule is an established benchmark used by many lenders to determine how much credit to offer you. Here's how it works:

 


 

Get preapproved for a mortgage. Your lender can approve you for a certain to loan amount prior to your home search. This gives you a solid number against which you can assess the affordability of the houses you visit.

 


 

 

 

The "28" refers to the notion that no more than 28 percent of your gross monthly household income should go toward housing costs, which include mortgage principal, interest, taxes and insurance.

To calculate, simply multiply your gross monthly income (amount before taxes) by .28. Use this amount as a guide for how much house you can afford.

Example: You earn an annual salary of $70,000. Divide 70,000 by 12, giving you a monthly gross income of $5,833. Multiply that by .28, and you'll find you should spend no more than $1,633 each month on total housing costs.

The "36" part of the 28/36 rule refers to your overall debt, which shouldn't exceed 36 percent of your income. This is important to consider because other high monthly debt loads – such as car and credit card payments – impact the amount you can afford to spend on housing.

For first-time home buyers, the tricky part is knowing how much to budget for taxes and insurance. Your agent can assist you with this.

Get In Touch

Local Expert Updates

Matt Lippon Broker Associate (Real Estate Agent)

Matt Lippon

Broker Associate

712.330.0604

712.336.4967

Aaron Jones RE/MAX Hall of Fame (Real Estate Agent)

Aaron Jones

RE/MAX Hall of Fame

712.320.9442

712.336.4967

Janie Eick  (Real Estate Agent)

Janie Eick

712.339.0574

712.336.4967

Community Updates

Aaron Jones RE/MAX Hall of Fame (Real Estate Agent)

Aaron Jones

RE/MAX Hall of Fame

 712.320.9442

 aaron@bojihomes.com

The Three Sons

Milford

Founded in 1960, the Three Sons has been a staple of Milford, IA retail. From Herman and Emil Richter, owners, was born the University of Okoboji, a ficticious university that calls the entire Iowa

More Info
Greg Sheeler Real Estate Professional (Real Estate Agent)

Greg Sheeler

Real Estate Professional

 712.330.1573

 greg@okobojipropertygroup.com

Lake Park Housing Authority

Lake Park

In 2013 the Lake Park Housing Authority was established to provide assistance to low and moderate income housing. The Dickinson County Board of Supervisors voted to release over $400,000 of TIF monies

More Info
Janie Eick  (Real Estate Agent)

Janie Eick

 712.339.0574

 janie@sellboji.com

The Studio Yoga & Barre

Spirit Lake

Come to one of the two locations: Spencer or Spirit Lake @ Allure & Co. to experience a community of people seeking to live healthier lives through exercising the body and mind. The Studio Yoga &

More Info

Subscribe To Our Newsletter

The newsletter is sent periodically and will updated you on the latest real estate news and offers.

Your browser is out-of-date!

Update your browser to view this website correctly.

Update my browser now

×