Understanding Home Buying Rules

Front

What is a down payment when purchasing a home?

Back

A down payment is the initial amount of money that a buyer pays upfront when purchasing a home, typically expressed as a percentage of the home's purchase price.

Front

What is the recommended minimum down payment percentage for home buying?

Back

20% is the recommended minimum down payment percentage for home buying.

Front

What does the Rule of 28/36 refer to in home buying?

Back

The Rule of 28/36 is a guideline that suggests that no more than 28% of a person's gross monthly income should go towards housing expenses, and no more than 36% should go towards all debts.

Front

What does the number 36 represent in the Rule of 28/36?

Back

The number 36 represents the maximum percentage of a person's income that should go towards all debts, including housing.

Front

What does the number 28 represent in the Rule of 28/36?

Back

The number 28 represents the maximum percentage of a person's income that should go towards housing expenses.

Front

How do you calculate the maximum affordable housing expense using the Rule of 28?

Back

To calculate the maximum affordable housing expense, multiply your gross monthly income by 0.28.

Front

If Olivia and Ethan earn a combined monthly income of $26,800, what is their maximum affordable housing expense according to the Rule of 28?

Back

Their maximum affordable housing expense would be $7,504 (26,800 x 0.28).

Front

What is the formula to determine if a couple can afford a specific house payment using the Rule of 36?

Back

Calculate 36% of their combined gross monthly income and subtract their total monthly debts to see if the remaining amount covers the house payment.

Front

If Maria and John earn a combined monthly income of $16,000, what is the maximum they should spend on housing expenses according to the Rule of 28?

Back

They should spend a maximum of $4,480 on housing expenses (16,000 x 0.28).

Front

What are some common types of debts considered in the Rule of 36?

Back

Common types of debts include mortgage payments, car loans, student loans, and credit card payments.