People oftentimes look at factors like interest rate as a whole, or home prices going down and what your monthly payment will be I think the key piece that you should look at is the amortization table and figure out if it quantitatively makes sense to buy a home. my monthly payment can be simply $500 more from my paycheck, but if you add everything, your equity in the home could be only $300 because your tax is high or your interest rate is eating up all your payment. on the flip side, you can own a same-priced home at a lower interest of 3% and you're better off looking at the pie chart and seeing where your payment is going into what percentage is interest
debt to income ratio
typically they recommend debt to income ratio of 36%. so let's say you make $67,780. you can qualify for $1870 per month in home payments.
your budget is around $1870 per month. in order to qualify, you will need a monthly gross income of $5200, or $67,780/year.
https://www.nerdwallet.com/mortgages/how-much-house-can-i-afford/calculate-affordability
now you can take that amount you're comfortable paying off $1870 and at the current, you might say yes I can afford a home of $300,000
but when you look at how much of that $1,866 is going to your equity vs interest, you would be appalled.
as much
that doesn't include tax or HOA. if you wanted to stick to roughly the same amount of monthly payment including the hoa and taxes, you're looking at a home that's 30% less at $200,000
so some common factor that is important is the interest rate, hoa, and taxes. you want to reduce these three fixed costs and consider them when buying a home.
you know what your income is and what you'll be qualified for, so put it into the amortization table and play around by seeing how much home you can afford with the given taxes and insurance and hoa.
even though you qualify for an $1877 loan, if you make 67K and your monthly take home is $3600, you are paying 50% of your take home in housing.
for me, if you want to pay 25% of net pay on housing you can do 67,000 *.7 = 46,900 take home or monthly of $3600. and 25% of that is $900.
if you want to go the safe route, you can target a $140,000 home and try to lower your HOA fee and wait until the rate drops and raise your down payment to 25%. this way you can save and invest.
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