I still remember when I bought our first house, which we still live in today, and if you read the blog back in 2005, you probably remember when I bought our first house too. (the wonders of blogging!) It was the biggest financial decision of my life up to that point, whether to sign my name to buy a house nearly five times my salary. We purchased the house for $295,000 and my salary that year was something like $65,000 (math geniuses will surely note that it’s closer to 4.5 times). I still remember going to the bank and getting the certified check and how I’d never seen a check with a number that big before and how crazy it was to spend that much money at one time.
I think it’s a rite of passage. While I don’t consider it the point at which I “grew up,” I certainly grew up a lot after ponying up that much cash for one single thing. Here’s the crazy part… the check wasn’t the part I should’ve focused on. It was the thirty years of payments I was agreeing to pay. Three hundred and sixty payments. I hadn’t even been alive that long.
Looking back, I think we made a good decision (despite home prices) but knowing how much house you can afford is an important step in any home buying process. Here’s how you determine how much you can afford.
(click here to continue reading…)