Housing is the typical American’s biggest monthly expense. And taking too high mortgage payment can undermine your finances and lead to the accumulation of a large amount of debt.
But what is considered too high? According to the National Association of Realtors, the average homeowner in the United States spends $ 1,067 a month on mortgage payments. However, that’s a pretty big jump from the average monthly payment of $ 995 a year ago.
The reason for this increase? Housing prices have increased to a minimum over the past year. mortgage rates and limited stocks have sharply increased consumer demand. As such, many recent home buyers may have taken on higher payments that skewed the national average upward – and that’s with mortgage rates have been extremely competitive over the past few months.
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How much mortgage payment can you afford?
If you are looking to buy a home, you might be wondering if you can afford the monthly payments that come with it. Of course, just because the typical homeowner pays $ 1,067 a month doesn’t mean you will pay that way. Depending on the home you buy and the market in which you buy, your mortgage payments can be much higher or much lower. The amount of your an initial fee will also determine what your monthly mortgage payments will look like.
So how do you know how much house can you afford? Generally, your projected housing costs should not exceed 30% of the salary you receive. There is little wiggle room in this formula, for example, if you live in a city that you can walk across, you spend almost nothing on travel costs. But for the most part, meeting this 30% threshold will help you avoid unnecessary words.
So what are the costs covered by this 30%? For the most part, these are your fixed monthly expenses, for example:
- Mortgage payment
- Property tax payment
- Homeowners insurance payout
- Homeowners’ Association Fees
- Private mortgage insurance payment (which applies if you do not pay 20% of the down payment for the house)
Now, let’s say you bring home $ 4,000 a month. This means that your housing costs should not exceed $ 1200 (based on this 30% recommendation). It also means you can change the average US mortgage payment of $ 1,067 if your other expenses are small.
To see what you can afford it is worth using mortgage calculator this will allow you to cover your expenses. This way, you can better understand which price range to stick to when buying a home. You can also play around with the different down payment options to see how this affects your monthly payments.
While the average mortgage payment can be $ 1,067, you can afford a lot more. Or, $ 1,067 may be too high a fee for you. Count the numbers so you don’t make a decision you regret.