Evaluate your current monthly cash flow, decide just how big of a house payment you can swing. Realize it will include not just principal and interest but also property taxes and insurance.
One rule of thumb suggests that your housing expense should stay between 25% to 36% of your take-home pay. So if your family brings home $5,000 per month after taxes, your mortgage payment, including taxes and insurance, should be between $1,250 and $1,800. Keep in mind, just because you can theoretically afford a higher house payment doesn't mean you should.
Consider, too, that the size of your house will impact your bottom line well beyond your payment. For example, more rooms mean more furniture, more upkeep and higher heating and cooling costs.
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