How Much Can I Afford?
Knowing how much you can afford to pay is a crucial step in your search. Nailing down your budget early will make the overall process more focused and less stressful.
Here’s a good way to figure out how much you can afford:
The 28/36 Rule
The 28/36 rule is an established benchmark used by many lenders to determine how much credit to offer you. Here's how it works:
Get preapproved for a mortgage. Your lender can approve you for a certain to loan amount prior to your home search. This gives you a solid number against which you can assess the affordability of the houses you visit.
The "28" refers to the notion that no more than 28 percent of your gross monthly household income should go toward housing costs, which include mortgage principal, interest, taxes and insurance.
To calculate, simply multiply your gross monthly income (amount before taxes) by .28. Use this amount as a guide for how much house you can afford.
Example: You earn an annual salary of $70,000. Divide 70,000 by 12, giving you a monthly gross income of $5,833. Multiply that by .28, and you'll find you should spend no more than $1,633 each month on total housing costs.
The "36" part of the 28/36 rule refers to your overall debt, which shouldn't exceed 36 percent of your income. This is important to consider because other high monthly debt loads – such as car and credit card payments – impact the amount you can afford to spend on housing.
For first-time home buyers, the tricky part is knowing how much to budget for taxes and insurance. I can assist you with this.
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Community Updates
Okoboji Boat Works
Okoboji Boat Works is home to "The Fish Shack" and "The Inconvenience Store". Formerly a marina of thriving boat sales since 1890, OBW now offers up many different rentals, a 24 hour gas dock, excursion boats, and more. I remember the days as a child of fishing for crappie and blue gill here and along the docks of Smith's Bay. Though the scenery has changed, the outstanding fishing has not.
"Turn-Over" Thermocline
Referred to locally as the lake turning over the thermocline is a feature of lakes with deep water. The water on the top of the lake changes temperature much more variably during the year. On West Lake, it can reach as much as 75 degrees in July while the water below, greater than 35 or 40 feet deep is relatively stable around 45 degrees. In the fall and early winter, the top strata of the lake will cool to below 45 degrees, and then because it becomes denser, it will "sink" below the lower strata, thus, displacing it and making the lake "turn-over". In the deepest part of West Lake (near the 136ft mark), no light is availble, and hence little life is known whether fish or plant. Typically questions are raised as to why the surface water gets dirty for a short period of time in the fall, this this is the standard answer.
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