Welcome to NerdWallet’s SmartMoney podcast, where we answer your real-world money questions — in 15 minutes or less.
This week’s question is from Steve in Denver. He asks: “I’m looking to buy a house in the next year, but I’m not sure what I can afford. How can I know how much house I can afford?”
Know your housing budget. When sorting out how much house you can afford, aim to keep all debt payments — including a mortgage — within 36% of your pre-tax income.
Can’t come up with a 20% down payment? You don’t need to. mortgage insurance as a trade-off, you can get away with putting as little as 3% down.
Even if you have the cash, ask if you’re emotionally prepared for homeownership. Having a home can be rewarding, but it’s a lot of work. If you don’t want to handle maintenance or don’t think you’ll stay in your house for at least three years, you might be better off renting.
More about homebuying on NerdWallet