This is the average homebuyer’s budget in 2024. Is it enough?

If you’re planning to buy a home in 2024, you probably know that current home prices have risen considerably. Consider that mortgage lenders are charging a lot for the privilege of lending, and that homes in 2024 are likely to be quite expensive.

In fact, according to a recent survey by Architectural Digest, the average individual looking to buy a home in 2024 will have a budget of $313,141. However, depending on the type of home you want to buy and the area you want to buy in, your budget may be larger or smaller.

But either way, it’s important to create a home-buying budget so you don’t struggle to cover housing costs later in life. There is a very simple formula you can use in this regard.

Stick to 30% of your income

In general, it is recommended to keep monthly housing costs below 30% of actual expenses. Of course, sometimes there have to be exceptions to this rule, such as if you’re buying in a big city where home prices are prohibitive. But in that case, since you can’t afford a car, you may be able to afford to spend more money on a house.

However, assuming you’re looking to buy in a typical market, it’s best to stick to the 30% guideline. That way, you’ll be less likely to be at risk of falling behind on housing costs or other essential bills.

Read more: mortgage calculator

Now, when you’re talking about limiting your housing costs to no more than 30% of your take-home pay, your monthly mortgage payment isn’t the only thing to consider. Rather, the 30% limit should include: every Recurring and predictable costs associated with your home, including:

How much should your housing budget be in 2024?

To calculate your home buying budget, start with your take-home pay. Let’s say you make $6,000 a month, 30% of that would be $1,800.

Next, let’s say you plan to spend $2,000 per year on property taxes and $1,000 per year on homeowners insurance without purchasing an HOA. That’s $250 a month that you need to budget for that bill. This means your mortgage payment should not exceed $1,550. From there, the amount you can spend on a home will depend on your mortgage interest rate and how much you have available for a down payment.

Let’s say you’re looking at a $250,000 house and have $50,000 for a down payment. If you lock in a 30-year mortgage at 7%, you’ll pay $1,330 per month in principal and interest. So in this example, since we’ve just established that you can afford to spend up to $1,550 in monthly mortgage payments, it’s probably a good idea to leave it as is.

But also consider the other costs you face. For example, if childcare costs are higher than usual, you may not want to spend 30% of your take-home pay on housing costs. Rather, it is better to limit yourself to 25%. Likewise, if you plan on going back to school and paying tuition, you may want to stick to a lower threshold.

Ultimately, you have to run your own numbers. However, use the 30% guideline as a guideline to stay on the right track.