PFT #101 - Personal Finance Tip of the Week: Can You Afford a Home?
Tue Aug 12 2025
Seeing that 75% of Americans live paycheck-paycheck and can’t afford to retire at 65 years of age, this means that they cannot afford their homes. With this statement you may think that is not right! People stay in their homes without missing payments throughout their lives.
This may be true; however, when you look at it holistically, a different viewpoint emerges. So let’s discuss.
According to the AP average price of a home is $414,000. With this scenario, Nerd Wallet says the average payment is 9%. So this comes to $37,260 leaving a mortgage of $376,470.
Closing costs average between 2-5% and by taking that 2% the mortgage comes to $384,000; and using an average interest rate of 7%, the payment comes to $2,874.
Okay that’s doable; however, we have also need to factor in averages for:
-Taxes at $3,200 or $271 per month
-PMI at 1% of the mortgage amount is $,3,840 / 12 = $320 per month
-Homeowners Insurance estimated at $2,400 / 12 = $200 per month
Total Payment Scenario is: $37,260 down payment plus $3,665 each month
So can you handle that?
Keep in mind that this is a starter home which will no doubt need improvements before long or upfront. So this brings us to the rules that you must follow:
1) If you do not have an emergency fund (3-6 months of a stipend),
2) A rainy day fund (to pay for unforeseen maintenance)
3) No credit card interest
4) You need to invest 10-15% of your gross income for retirement
If you cannot meet this criteria, then this means that you cannot afford the home.
Eventually, you will run into a situation where you’ll need additional money that you don’t have which leads to additional borrowing, leading you down a rabbit hole.
Now for the last thing . . . if you are already a homeowner and you don’t meet this criteria, consider making a change so that you can plan effectively your future.
When it comes to your retirement, it’s not timing the market, it’s time in the market.
The bottom line with homebuying is to be patient especially in times of high interest rates as the wrong decision can lead to several years of maintaining debt.
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Seeing that 75% of Americans live paycheck-paycheck and can’t afford to retire at 65 years of age, this means that they cannot afford their homes. With this statement you may think that is not right! People stay in their homes without missing payments throughout their lives. This may be true; however, when you look at it holistically, a different viewpoint emerges. So let’s discuss. According to the AP average price of a home is $414,000. With this scenario, Nerd Wallet says the average payment is 9%. So this comes to $37,260 leaving a mortgage of $376,470. Closing costs average between 2-5% and by taking that 2% the mortgage comes to $384,000; and using an average interest rate of 7%, the payment comes to $2,874. Okay that’s doable; however, we have also need to factor in averages for: -Taxes at $3,200 or $271 per month -PMI at 1% of the mortgage amount is $,3,840 / 12 = $320 per month -Homeowners Insurance estimated at $2,400 / 12 = $200 per month Total Payment Scenario is: $37,260 down payment plus $3,665 each month So can you handle that? Keep in mind that this is a starter home which will no doubt need improvements before long or upfront. So this brings us to the rules that you must follow: 1) If you do not have an emergency fund (3-6 months of a stipend), 2) A rainy day fund (to pay for unforeseen maintenance) 3) No credit card interest 4) You need to invest 10-15% of your gross income for retirement If you cannot meet this criteria, then this means that you cannot afford the home. Eventually, you will run into a situation where you’ll need additional money that you don’t have which leads to additional borrowing, leading you down a rabbit hole. Now for the last thing . . . if you are already a homeowner and you don’t meet this criteria, consider making a change so that you can plan effectively your future. When it comes to your retirement, it’s not timing the market, it’s time in the market. The bottom line with homebuying is to be patient especially in times of high interest rates as the wrong decision can lead to several years of maintaining debt. Website https://www.somethingonmymind.net/ Social Media https://www.instagram.com/somm.podcast/ https://www.youtube.com/channel/UChec5qcZBcGkIhUU3belNDw https://www.tiktok.com/@somm.podcast?lang=en https://www.facebook.com/somm.podcast https://twitter.com/Somm_podcast Website https://www.somethingonmymind.net/ Personalfinance personalfinancetips investing stockmarket finance podcast budgeting retirement autoloans refinance credit cards 401(k) creditcards sidehustle debt-free FIREmovement budgeting studentloans mortgages wills trusts IRA economy creditscore