The decision to buy a home is a big one, whether this is your first or third time.
In fact, there are few investments as substantial as real estate, so you’ve got choose carefully. While picking out properties in your favourite neighbourhood can be lots of fun, the really important stuff happens on paper.
So, if you already know where you want to buy, it’s time to do the maths and work out how much house you can afford. Ideally, you shouldn’t think about choosing your dream home design until you have a good grasp of your budget. That way, you’re guaranteed a speedy search, because you’re not wasting time checking out unsuitable options.
This guide to formulating a house-buying budget will help you come up with a ballpark figure.
The Rule of 28 (Mortgage Payments)
You can work out how far your money will go by using what is known as the ‘rule of 28’.
This states that monthly mortgage payments should not be bigger than 28%2