How Much House Can You Afford in Your New Town?
Your job relocated. Or maybe you’re moving to your dream city and telecommuting to work. If houses are less expensive you might be able to afford a lot more. But if the housing market is more competitive in your new city, you might be left feeling a little cramped. You’ll need to know how much house you can afford, but there are some other things to think about before you get to that number.
Overall cost of living
Sure your house might be cheaper. But if you suddenly have to drive when you used to walk and your water bill’s doubled, are you really saving money? Think about how all your monthly expenses are going to change in your new town. If they’re a lot different, you might want to rethink how much house is right for you.
When you're in the process of moving, try asking your real estate agent or connecting with locals on social media in order to understand the total cost of living in your new town.
Lifestyle
Do you love to travel? Are you an insatiable foodie? If you have expensive hobbies, you’re going to need money for them. Would you rather live frugally in a larger home or spend more of your income on fun? Remember, your monthly expenses are going to be more than just your mortgage payment.
Other debts?
If you’re selling your apartment in Manhattan and moving to South Texas, you’ll probably be able to afford a lot more space than you could in New York. But would that money be better spent paying off student loans, credit card debt, and your car? Once you’re debt-free (and have something in savings) you can always remodel your current home or move to a bigger one home if you need to.
How much can I afford to spend on a house?
Now that you have the answers to all of these questions, you can start thinking about your overall budget. Decide how much you can afford to spend on your mortgage every month while still maintaining your lifestyle and paying your other debts. Then decide how much money you can put down on a house. If it's less than 20%, remember to factor PMI into your monthly mortgage budget.
From there you have a ballpark number and you're ready to start house hunting!
A big move is a great opportunity to examine your budget--especially when it comes to housing. So figure out what's important to you, make a plan, and buy (or rent) accordingly.