Ryan asks Dave how to determine how much house you can afford based on your yearly income. Dave gives the answer and an explanation here.Read Transcript
How to Buy a Home the Money-Smart Way
Each month, thousands of people spend too much on their home purchase. We’ll show you how to find a house you love that you can also afford.
1) Start with a solid money foundation.
Before buying a home, you should pay off all of your debt, such as car payments, credit cards and student loans. You should also have 3–6 months of expenses in an emergency fund and save up at least 10–20% of the home price for a down payment.
2) Figure out how much your monthly payment will be.
Your monthly mortgage payment should be less than 25% of your total take-home pay. It’s important to know how much home you can afford so you don’t wind up in financial trouble.
3) Go with a 15-year, fixed-rate mortgage.
A 15-year, fixed-rate mortgage will save you big money in interest in the long run, versus a 30-year or variable rate mortgage.
4) Get an expert negotiator on your side.
A real estate agent will help make sure you don’t pay too much for your new home. They can also deal with unexpected home-buying hurdles and answer your questions before you take ownership.
Your home is the biggest purchase you may make. Buy the home that's right for you with an experienced agent you can trust.
Fundamentals of Buying a Home
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