This was the average mortgage amount in May. Can you download it?

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This is a tough time to buy a home. Not only are stocks of goods extremely limited, but house prices have hit their lowest levels over the past year. mortgage rates increased consumer demand.

In fact, according to the Mortgage Bankers Association, the average mortgage loan signed in May was $ 384,000. This is a significant increase from the average home loan amount of $ 377,434 in April, and it is also the fourth straight month of increase in the cost of mortgages.

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How much of the mortgage payment can you afford?

You often hear that it would be a good idea to cut your housing costs by 30% or less of the salary you receive. There are, of course, exceptions. In some parts of the country, this 30 percent threshold may not be possible due to persistently inflated housing prices. And in some cities, the absence of the need for a car gives more room to maneuver, which can be spent on housing.

But for the most part, you should aim to keep your housing costs below 30% of your paycheck. And to be clear, that doesn’t mean you mortgage payment alone can eat up 30% of your paycheck.

Paying off your mortgage, which consists of the principal and interest on the loan, is only a fraction of what you spend on owning a home every month. You will also have to pay the following costs:

  • Property tax
  • Homeowners insurance
  • Private mortgage insuranceif you do not make a 20% down payment and have a regular loan
  • Homeowners Association (HOA) fees if you buy a HOA that collects fees

So, when you think about that 30% threshold, be sure to consider all of the above elements, as well as the principal and interest on your loan.

Plan ahead and spend wisely

Now let’s get back to today’s housing market. Since the value of a home is so overpriced, you may find that an area that you normally could afford is now in huge financial distress. And if so, you may need to buy a home elsewhere, or pause your search for a home until there are more offers on the market.

If you spend too much money on housing, you run the risk of falling behind not only on the mortgage itself, but also on the bills in general. If this happens, you could end up ruining your credit and accumulating a large pile of debt.

In order not to overdo it with housing costs, use mortgage calculator to see what your monthly payments will look like depending on the homes you are planning and the funds you have for the down payment. And then make sure you stick to the 30% rule.

While mortgage debt is generally considered a healthy type of debt, since it allows you to end up owning an asset that can rise in value over time, mortgage debt that is too large is not healthy at all.

Borrowers across the country are taking on ever higher mortgages so they can buy homes in today’s market. But if you feel that a $ 384,000 mortgage or something in the area is uncomfortable for you, you should either switch to looking for a home or postpone your buying plans until home prices fall.

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