California Bungalow’s or Craftsman homes are adorable.

With interest rates at an all time low and housing prices stagnating, now is a great time to buy for the right person. Using an emortgage calculator to figure out how much house you can afford is a great start. But first you need to determine if you have what it takes to own a home.  As someone who is on a mission to own a house within the next few years, I’ve done some research and realize if a person has their financial house in order (oh the pun, the pun) they’re off to a great start:

  • A very good or excellent credit score; the higher the score, the lower the interest rate and the more likely the approval rate.
  • Low to zero consumer debt; very little or no debt means less money is being siphoned out each month so more can be applied to a mortgage.
  • A 20% down payment; a larger down payment means a smaller loan.

Of course once a person determines they have what it takes to purchase a house, it’s time to figure out what they can afford. A few ways to calculate how much house you can afford are:

  • Use a mortgage calculator; many calculators can help you determine how much house you can afford. Some even take into consideration your income, how much debt you currently have and the amount of your down payment.
  • Use an old standard, the 3/30/30 rule; this is an old standard – you should buy a house no more than 3 times your annual income, put 30% down (best case scenario) and pay no more than 30% of your monthly income on a mortgage payment.

Don’t be pushed into buying something outside of your comfort level. There are so many websites today that will assist you in finding the right home at the right price, don’t be impatient and splurge on too much of a house. Before meeting with a realtor, check out neighborhoods you’d like to live in online and determine what homes are selling for in those areas, you’ll have a better idea of prices in that neighborhood. If you can print out a list of homes within your price range, you’ll have a starting point you can show a realtor or broker.  I’d even go as far as saying don’t go into homes you know you can’t afford; stay away! If you know $425,000 is too high but your realtor really “wanted” you to see it, don’t even bother walking in the door! Be firm and stick within your budget. Buying a home that is easily affordable will give you the extra cash to make it the home you really want.

Are you working on purchasing a home? Did you buy a home within your price range?

This post was provided by Emortgage Calculator.


  1. I bought my current home (townhouse) 14 years ago. We downsized from a large 5 bedroom house and the townhouse is very affordable. Unfortunately it is a three story and we will evetually move into a one level some day. It might be worthwhile to start the hunt soon with interest rates so low.

    • @Krantcents – That could be a post in itself; making a move later in life because your home just doesn’t fit your needs anymore. Oooh, I think I have my next post! 😉

  2. We actually bought a modest home and I’m glad we didn’t go overboard. The extra savings goes back as extra principal payments on the house!

  3. 20's Finances Reply

    I know too many people who bought too much house that there is no way I could make the same mistake. I couldn’t agree more. I think people would be surprised to realize how little of a house they NEED.

    • @20’s Finance – I also know many people who are regretting buying too much of a house. I think going a bit smaller and having some money left over is a better strategy for sure!

  4. Great post. Here’s a neat little exercise I’d do when we weren’t sure if we could afford payments on something new: we’d save into a savings account for a few months whatever the payment was to see how it felt.

    If we were able to swing it…great. If not, at least we had the money in savings where we could get at it, instead of locked up in a property.

  5. MultiMillionaireRoad Reply

    Hi there,
    Not buying a house any time soon but it’s good to think about this sort of stuff early. I was wondering if you would recommend overpaying your mortgage or getting a 15 year mortgaeg as opposed to anything longer? Furthermore, for the 3/30/30 rule, is it net income or gross? Thanks once again.

    • @MultiMillionareRoad – I think getting a 30-year mortgage but paying it off earlier is probably a better strategy for most people. I know you can get a slightly lower APR going with a 15-year, but then you’re trapped into paying the higher mortgage payments no matter what your circumstances. As for the 3/30/30 rule, it’s based on gross. (Someone correct me if I’m wrong).

  6. Always gotta be careful and not buy more house than one can afford. The banks especially like to loan large amounts, though they are a bit more careful these days.

    • @FG- I’m sure banks are much more cautious now a days than they were a few years ago. They are still feeling the fallout from loans gone bad!

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