How much can I afford to spend if I’m buying an apartment?
There are so many rules-of-thumb, but here’s Ali’s easiest:
If you have or want kids, you can afford to carry a mortgage of 2X your annual salary;
If you don’t have kids, you can afford to carry a mortgage of 3X your annual salary.
So let’s say example 1: you make $350,000 a year, you can put $120K down, and you have three kids. You can afford a mortgage of 2X your annual salary, or $700,000. If you put $120K down, you can afford a $820,000 house or apartment.
Example 2: you make $75,000 a year, can afford to put $45K down, no kids. You can afford a mortgage of 3X your annual salary, or $225,000. If you put $45K down, you can afford a place that costs $270,000.