May 17, 2021How Much Home Can You Afford? 

When deciding whether to buy a home, remember that a house is an investment. Your goal could be to eventually pay off the mortgage loan early to cut monthly payments, build equity to use in the future, or sell the house once its value increases. Whatever your motivation, choosing to become a homeowner should not be taken lightly.  

When calculating how much house they can afford, most people only focus on the down payment and monthly mortgage payments. Mortgage calculators found on real estate sites can be misleading because they only calculate principal and interest for your estimated payment. But other expenses, like homeowners insurance and property taxes, may also be added to your monthly mortgage payment amount 

Let’s review a few more bills to think about when deciding whether buying a home is right for you. 

Homeowners Insurance 

Homeowner insurance varies by the location of your home and your mortgage lender’s requirements. You may also need special hazard insurance, such as flood, hurricane, or earthquake protection. Get quotes from a few different insurers to better estimate insurance costs. 

Property Taxes  

It is important to note that property taxes don’t always stay the same when ownership is transferred. Often, home listings will show what the sellers currently pay in property taxes; however, the amount could rise due to reassessment of the property‘s market value. Other factors that could change property taxes are local and county property tax changes or renovations added after buying the house.  

To get a good estimate of what your property taxes might be, check the current taxes of houses recently sold in the area that are similar in size and features to the house you are considering. 

HOA Fees  

Depending on where you buy, your home may have monthly or annual Homeowners Association (HOA) fees. These fees are used to maintain the neighborhood. For example, they’ll cover costs such as HOA management services, neighborhood upkeep, or major repairs needed for condo exteriors, clubhouses, pools, and other common areas. Most home listings will post the HOA fees, and you can contact the HOA directly to ask about annual costs. 

Utility & Maintenance Costs  

Utility costs may affect how much of a home you can afford. The costs may increase or decrease depending on the size of the home and the types of features it has, such as electric vs. gas appliances and heating systems. Since you will no longer be a tenantit is important to figure out the maintenance costs for mechanical systems in your house (routine furnace, air conditioner, and water heater servicing).  

Figuring Out How Much You Can Afford 

While each lender has its own rules and requirements, a quick way to calculate how much you can afford is to take your annual household income and multiply it by 2 ½ times. If your annual household income is $80,000, you should be able to afford a $200,000 home.  

Buying a home should not put you in financial debt. Sit down and write out a list of current debts, future home expenses, your incomeand how much you will set aside for down payments, HOA dues, insurance, and utility costs. Then crunch the numbers. It’s always better to overestimate your costs to make sure you can afford your home comfortably.  

We’re Here to Help! 

Are you ready to be a homeowner? If so, your first step is to get a preapproval from PEFCUWe’ll show you how much you can afford to spend, help you estimate closing costs, moving expenses, and more. 

Stop by, message us through online or mobile banking, or give us a call at 1-800-226-6673 to get started. 


Each individual’s financial situation is unique, and readers are encouraged to contact PEFCU when seeking financial advice on the products and services discussed. This article is for educational purposes only; It does not constitute legal advice. If such advice or a legal opinion is required, please consult with competent local counsel. 



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