How Much Northern Virginia Home You Can ACTUALLY Afford (By Salary)
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One of the most common questions I get when working with home buyers, whether first-timers or even seasoned veterans, is how much they should budget.
When you decide to buy a house, it's not just the mortgage you need to account for. There are taxes, insurance, sometimes homeowner's association fees, and maintenance costs.
To calculate potential maintenance costs, a common rule of thumb is the 1% rule, which suggests that homeowners should allocate 1% of the home’s value each year for routine maintenance. Another rule is the $1 per sq ft rule, which recommends setting aside $1 per square foot of your home annually for maintenance.
Thus, the calculation should be Mortgage + Taxes + Insurance + HOA Fees + Maintenance (1% of the home value or $1 per sq ft). Financial experts commonly suggest that your monthly home costs shouldn't exceed 28% of your pre-tax monthly income. It's an essential threshold to keep in mind.
Scenario 1: Single Homebuyer with $85,000 Salary
Let's consider a single homebuyer earning $85,000 annually. They're looking at two houses:
House 1: $600,000, 2,040 sq ft home with a $500 monthly property tax bill, $210 insurance payment, and a $94 HOA fee. The estimated monthly mortgage is approximately $4,068 (assuming a 10% down payment and a 6.25% mortgage rate).
The 1% rule suggests an additional $500 monthly maintenance cost or $204 monthly using the sq ft rule. The total monthly cost, including all expenses, varies between $4,575 and $4,750. These costs represent over 60% of the buyer's pre-tax monthly income, making it a financially demanding option.
House 2: $349,000, 1,656 sq ft home, with $338 in monthly taxes, $112 insurance bill, and a $205 HOA fee. The estimated monthly mortgage is around $2,648.
The 1% and sq ft rules state monthly maintenance costs of around $291 or $138, respectively. Total monthly cost, including all expenses, is between $2,849 and $3,002, or 40-42% of pre-tax income. This is still above the recommended 28%, but it's significantly more affordable than House 1.
In this case, the buyer may be best looking for a slightly more affordable home or finding a way to make a larger down payment, even if it means renting for another year.
My Suggestion would be to stay under the $300,000 Prince Range. Some great areas are condos in Manassas, Leesburg, and Woodbridge. You can also drive further out of Northern Virginia and check out Front Royal, Linden, Culpeper, and Spotsylvania to find some more affordable housing.
Scenario 2: Married Couple
Now let's consider a married couple with a combined income of $200,000 annually. They're interested in the following:
House 1: As already discussed above, this house's total monthly cost will only represent about 27% (using the sq ft rule) to 28% (using the 1% rule) of their pre-tax monthly income, making the $600K home an affordable option for the couple.
House 3 is listed for $989,000 and has 3,273 sq ft, a $717 monthly tax bill, a $346 insurance bill, and a $140 HOA fee. The estimated monthly mortgage is about $5,389. Per the 1% rule, maintenance would add approximately $823 per month, or $273, using the sq ft rule.
The total monthly cost ranges from $6,865 to $7,415, or 41-44% of pre-tax income. This exceeds the recommended 28%, suggesting it may stretch the couple's budget.
If you wanted to stay at the salary under $750,000 to $800,000 there are still plenty of great Options in Northern Virginia. Loudoun County has an average sales price of $780,000, but Prince William County is around $550,000.
These are just general rules, but I have found that there is enormous value in following them. Considering your income, the house price, maintenance costs, and other fees are crucial when determining what house you can afford. This step ensures your dream home remains a joy, not a financial burden.
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Chris Colgan
EXP Realty LLC
Licensed In Virginia VA DPOR # 0225 075803 703-485-1435