One of the first questions a homebuyer moving to the Atlanta area asks is “how much house can I afford?” If this is your first time buying a home in Atlanta, the process can be even more complicated because there are other expenses involved besides just a mortgage payment. The following overview should serve as a guide to help you determine your budget and price range before you begin your home search.
Basic benchmarks
Generally speaking, most financial planners consider a home “affordable” when the total monthly costs do not exceed 30 percent of the household’s monthly income. This 30 percent includes mortgage/rent, insurance, utilities and so on. Start by tallying up your monthly income after taxes. Include all sources of income, such as wages, royalties, investment income, alimony, etc. Thirty percent of this amount is the most you should pay for your housing. Note, this is a good exercise because your mortgage broker will likely need this information, and it puts you that much more ahead of the process.
Estimating costs of housing
Some mortgage calculators are available online and will give you an estimate of your mortgage payment based on the price of the home and the interest rate on the loan. However, the mortgage is only one part of your housing costs. You will also need to estimate the following:
- Homeowners insurance: This varies according to the housing market, but you should estimate about $35/month for every $100,000 of your home value.
- Private mortgage insurance: With a down payment of less than 20 percent (common for first-time buyers), you will be required to have mortgage insurance, which is usually between 0.5 and 1 percent of the loan amount annually. In actual dollars, estimate an additional $85/month for every $100,000 of the loan.
- Property taxes: Taxes vary by county, but in the Atlanta area, they generally run between $2,800 and $3,000 a year for a $250,000 home. If you have a mortgage, this amount is usually spread over your monthly payments. For estimates only, figure on about $100/month per $100,000 of home.
- HOA fees: Some neighborhoods have a homeowner’s association that requires monthly or annual dues for neighborhood upkeep.
- Utilities: This is the widest variable because it depends not only on the cost of services, but on how much electricity, gas, water, etc. you actually use — and every household is different. If you have not lived in Atlanta long, your real estate agent may have a good idea of what you can expect.
There are a few more extensive online calculators available that will take some of these factors into account locally (Nerdwallet has a good one). However, remember that these serve as estimates only; your own income and expenses may have an affect on these numbers. When you’re ready to start searching in earnest, call Atlanta Fine Homes Sotheby’s International Realty at 404.948.4812.