Figuring out how much home you can afford is one of the first steps in buying a home. This is largely determined by your income. When you do the math, you’ll use your current income to find out how much you can afford each month. But you should also be thinking about the future and how your income could change.
If your income increases in the future, that’s great. Your home will be even easier to afford. But what happens if your income goes down? Below are some tips for planning for possible income drops or gaps.
- Save up an emergency fund. If you don’t have one already, save up an emergency fund in a high yield savings account. It should be able to cover 6-12 months of expenses. This fund will help you to stay afloat if you end up getting laid off while you search for your next job.
- Account for your future plans. What are your plans for the future? Do you want to have kids? If so, they are going to add to your monthly expenses. Calculate how much you expect to spend on each child in the future, and account for that in your calculations. Ensure you will be able to afford both your home and the children.
- Leave some wiggle room in your budget. However much money you think you are going to need, chances are good you will exceed your expected budget at least some of the time. Don’t cut things too close when it comes to choosing a home and mortgage amount. Give yourself a little more buffer space than you think you are going to need. You will probably have to use it sometimes.
- Don’t forget about inflation. Let’s say your income stays exactly the same over the next 30 years in terms of the dollar amount. Is your income still really the same in 30 years? Technically, no. Because of inflation, the same dollars do not stretch as far. So, if you expect no change in your income, you should actually think of it as a decrease over the long run, and plan accordingly.
- Be proactive about your career. Ideally, instead of letting inflation eat into your earnings, you should take a proactive approach to climbing the career ladder.
- Pay raises are less common than they used to be, and layoffs are frequent. As a result, the best approach for a lot of professionals is do job hop deliberately. Strategic job hopping can help you raise your income with progressively higher offers, keeping your home and lifestyle affordable over the long run.
Buy a Home in Florida
PLC can help you figure out how much home you can afford. We can also walk you quickly and easily through the mortgage application process. We are based in Cooper City, and can help you buy a home anywhere in Florida. To get started, please give us a call at 954-840-8811 to schedule your consultation.
