Homeownership has become increasingly challenging for many Americans, primarily due to high mortgage rates and inflation. It is crucial for potential homeowners to assess their financial responsibilities beyond the mortgage commitment to avoid becoming "house poor." Experts recommend calculating 'true expenses' and considering future lifestyle goals, such as education and travel, rather than just relying on lender recommendations. Popular guidelines suggest keeping mortgage costs between 2 to 2.5 times annual income or 28%-30% of monthly income, while a down payment of 20% is often expected.
When figuring out how much house you can afford, you must step back and look well beyond what the bank confidently says you can borrow.
Thinking about your future lifestyle and goals is key. So, instead of only factoring in your mortgage payment, think about all future expenses like children's education, travel, and any hobbies you want to pursue.
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