You’re likely aware that homes these days cost astronomical sums, with the median home price nationwide hovering at $375,000—an increase of 10% from a year earlier.
Daunting? For sure. Yet if you’re pondering a home purchase right about now, the more important number to know is this: How much home can you afford?
The answer to this question is all the more critical in today’s red-hot, warp-speed market, where you won’t stand a chance without a clear picture of your finances. If all you have is a hazy idea of what you can pay, home sellers will have a hard time taking you seriously. Worse yet, you might get swept up in a bidding war on a home and win—only to find out afterward that you’ve committed to a price beyond your means. Yikes!
The key to achieving homeownership today is to have a bull’s-eye focus on what’s within your financial reach—and vow to not spend a penny more.
“Head into a house hunt with your numbers in hand. Know your top number,” says Jay Zigmont, certified financial planner and founder of Live, Learn, Plan. “If you can afford a $250,000 house, don’t look at $300,000 houses. You will by nature like the $300,000 houses better and start rationalizing spending more.”