Planning to Buy a Home: Determining What You Can Afford and Where You Can Save

A home is one of the most valuable financial investments you’ll make, but how much can you afford? According to a general rule of thumb, you can afford a house that costs two and a half times your annual salary. But determining how much you can afford to spend on a house is not quite so simple. Since most people finance their home purchases, buying a house usually means getting a mortgage. So, the amount you can afford to spend on a house is often tied to figuring out how large a mortgage you can afford. To figure this out, you’ll need to take into account your gross monthly income, housing expenses, and any long-term debt.

Generally, if you’re applying for a conventional mortgage, your monthly housing expenses (mortgage principal and interest, real estate taxes, and homeowners insurance) should not exceed 28 percent of your gross monthly income. In addition, the Consumer Financial Protection Bureau’s mortgage rules suggest that borrowers have a debt-to-income ratio that is less than or equal to 43 percent. In other words, you should be spending no more than 43 percent of your gross monthly income on longer-term debt payment. It may be helpful to use one of the many real estate and personal finance websites to help you with the calculations.

Home Savings Tip provided by RBFCU Investments Group: When buying a home, you’ll probably spend a fair amount of time comparing lenders to get the best interest rate on your mortgage. But what about spending time on your homeowners insurance too? The cost of homeowners insurance can vary by hundreds of dollars, depending on the type of policy you buy and where you buy it. And because every penny counts, make certain you shop around. Obtain a number of quotes from several insurance companies and compare price, service and reputation before making a decision. Home quotes are simple with RBFCU Insurance Agency. Visit rbfcu.org/getquote.

Plan for tomorrow. See a financial advisor today.

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RBFCU Investments Group LLC is a wholly-owned subsidiary of RBFCU Services LLC. RBFCU Services LLC is affiliated with Randolph-Brooks Federal Credit Union (RBFCU). Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA / SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. FR-2133218.1-0518-0620

Article prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018; February 08, 2018

RBFCU Insurance Agency LLC is a wholly-owned subsidiary of RBFCU Services LLC. RBFCU Services LLC is affiliated with Randolph-Brooks Federal Credit Union (RBFCU). Insurance products are not deposits; are not obligations of the credit union; not NCUA insured; and not guaranteed by RBFCU Insurance Agency LLC, RBFCU Services LLC or RBFCU.