Final answer:
To know if the price of a particular house fits your budget, assess your total income, establish a family budget, and evaluate all costs associated with home ownership. Compare these to your discretionary income to ensure the house is affordable without compromising other financial obligations.
Step-by-step explanation:
To determine if the price of a particular house fits your budget, you need to consider several factors. First, evaluate your total monthly income against your cost of living and other expenses. It's essential to have a family budget that includes all your monthly expenditures and savings. The portion of your income left after covering other expenses can determine your budget for housing.
When evaluating a house, think about the monthly mortgage payments, property taxes, insurance, maintenance costs, and any homeowners association fees. These are part of the home ownership costs and must be accounted for in your budget. More so, consider your future financial plans and the liquidity and risks associated with investing in property. Make sure the costs associated with the house, potentially increased due to biases like a realtor showing you different types of houses, do not exceed the affordable amount within your budget without hampering your other financial obligations and goals.
To work out if a house suits your budget, include all foreseeable expenses and compare them with your discretionary income. If you can comfortably afford the payments while still meeting your savings and other living requirements, the price fits your budget. Use tools like mortgage calculators and professional advice to get a detailed understanding of what you can afford.