The Magic Number of Home Buying: Find Your Perfect Fit!

Hello, Chicagoland house hunters! When you're stepping into the exciting world of homeownership, there's one crucial figure that can make or break your buying experience. No, it's not just your credit score—though keep that handy! It's your 'magic number' for home-buying affordability.

What's the Magic Number?

Financial gurus often tout the rule of thumb: Keep your mortgage payments at or below 28% of your pre-tax income, provided you're light on other debts. However, life often comes with its bundle of financial baggage—student loans, car payments, you name it!

Adjusting the Numbers

When other debts enter the scene, the focus shifts. The aim is to ensure your TOTAL debt payments—from your mortgage to monthly car installments—don't eclipse 36% of your pre-tax earnings. Here’s a breakdown:

  • Monthly Income: $5,000
    Using the 28% rule, you could comfortably allocate $1,400 to mortgage payments assuming zero debt. However, if you're already dedicating $600 towards other debts, the 36% rule suggests adjusting your mortgage budget down to $1,200 to keep total debts under $1,800.

Let's Talk More Real Numbers

Curious about how this scales with different incomes? Let's explore:

  • Monthly Income: $12,000
    With the 28% rule, you can initially set aside $3,360 for a mortgage. If you have $1,500 in other monthly debts, under the 36% rule, your total debt payments shouldn't exceed $4,320. Therefore, you could afford a mortgage up to $2,820.
  • Monthly Income: $20,000
    Starting with the 28% rule, you might consider $5,600 for your mortgage if there are no other debts. However, with $2,000 going towards other debts, the 36% rule limits your total debt payments to $7,200. Thus, your mortgage budget would be adjusted to approximately $5,200.

Finding Your True Magic Number

Each financial scenario is unique, like the perfect Chicago hot dog—tailored to your tastes! Whether you're a first-time buyer or a seasoned homeowner, knowing your magic number is crucial in keeping your finances healthy and stress-free while you enjoy the excitement of buying your dream home.

Need help dialing in your specific numbers? Shoot me a message! I can connect you with a stellar lender who'll help make the math as easy as pie—err, as deep-dish pizza!

Happy house hunting! Let's make some magic happen and find you a place where you belong. 🏡✨