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If you’re a first time homebuyer or haven’t purchased a home in many years, it can be especially overwhelming to think about house hunting. The process is pretty different from apartment searching. When shopping for a rental, it’s relatively intuitive to figure out how much you’ll be able to afford. With the exception of varying expenses for utilities, you’ll know up front what your monthly payments will be. Homes for sale, though, don’t come with the same type of price tag – the “for sale” signs won’t tell you up front what your monthly expenses will be. So how can you find out what price range you should contemplate when looking to buy a house? What should you consider?

## Fast Math for a General Idea

A simple rule of thumb that many use to determine house affordability is to multiply the annual gross income of the purchaser by 2.5–3. This can give you a quick and dirty idea of what price you should be able to responsibly manage. So, if you make \$50,000 per year before taxes and deductions, you could start casually viewing homes in the \$125,000–\$150,000 range.

There are some limitations, of course, to using this rule of thumb. There are multiple factors that it doesn’t take into account. The guideline doesn’t, for example, consider personal monthly expenses – as we all know, these can vary greatly from one person to the next. It also doesn’t take into account the costs unique to purchasing a condo, like association fees, or the additional costs unique to certain areas, like flood or earthquake insurance.

## My (Your!) Mortgage Calculator

To get a more accurate estimate, check out our mortgage calculator. We’ll ask you a handful of simple questions. First, you’ll be prompted to select which of the following two goals is most important to you: Do you want to have the lowest possible monthly payment, or do you want to pay off your home in less time? If you’re not sure yet, play around! Select one option, get your results, and then come back to try the other option.

You’ll also be prompted to enter the cost of the home you want to buy, your credit score (this will impact your interest rate) and the zip code of the area in which you want to live. Voila! We’ll give you estimates for your initial monthly payments, interest rates and closing costs for various types of loans. If you were way off thinking you could afford that \$700,000 house, go back and try again. It’s better to know up front what you can afford before you fall in love with a home that’s just a little (or a lot) too big.

## Talk It Out

Call in the professionals. A real estate agent or a home loan expert can take a look at your numbers and help you crunch them. Their expert analysis will certainly help to get you on the right track for looking at the right homes.

You can also chat with someone you trust who has been through the process before. Just be sure to select someone who is known for having good financial knowledge and sensibilities, and keep in mind that the process can differ greatly from one person to the next.
What do you think? Are you ready to start looking for that perfect, affordable dream home? It’s out there! Get hunting.