If you make $120,000 a year, you can afford a house that costs up to $33,600 a year or $2,800 a month for housing expenses. However, it’s important to keep in mind the 36 percent threshold for debt-to-income ratio. Here are some guidelines for safe debt:
Try to keep your housing expenses below 28 percent of your pre-tax income.
Make sure your total debt-to-income ratio does not exceed 36 percent.
Don’t take on too much debt, even if you think you can manage the payments.
Consider all of your long-term financial goals before making a decision about buying a house.
Remember that unexpected expenses can arise, so it’s smart to have an emergency fund in place.
By following these guidelines, you can ensure that you’re making a financially sound decision when it comes to buying a house. While it may be tempting to stretch your budget to afford a more expensive home, it’s important to prioritize your long-term financial stability and make a decision that aligns with your goals and resources.