U.S. Median Home Price Reaches $385,000. Can You Afford It?

Home prices are up on a national level. Can you keep up as a buyer?

It's a really good time to be selling a home right now. Not only has limited inventory made for less competition, but homes are flying off the market at warp speed.

In July, the typical home sat on the market for 38 days, reports Realtor.com. By contrast, it took an average of 60 days to move a home off the market the July prior.

But that's not the only reason why sellers are in a great spot right now. Home values are also soaring. Last month, the national median listing price rose to $385,000, up 10.3% compared to a year prior.

Now depending on your home-buying budget, $385,000 may be more than doable. But what if you're not sure? Or what if that's not what homes in your area are going for? Here's how to know whether you can afford to buy, or whether it pays to wait until prices come down.

How much can you afford to spend on a home?

As a general rule, it's a good idea to make sure your monthly housing expenses don't exceed 30% of your take-home pay. And by monthly expenses, we're talking about predictable costs that include your:

• Mortgage payments: The amount you'll pay in home loan principal and interest.
• Property taxes: You might pay these quarterly but it's a good idea to set funds aside for them each month.
• Homeowners insurance: You may pay premiums annually, but again, you'll need to set funds aside each month to cover that cost.
• Private mortgage insurance: This applies if you don't put down 20% of your home's purchase price at closing.
• Homeowners association (HOA) fees: You'll pay these if you own a home in an HOA that requires you to pay monthly dues.

Once you've accounted for all of those expenses, you can use a mortgage calculator to see how much house you can afford based on the amount of money you have for a down payment and the interest rate you think you'll qualify for. You can check out this rates page for up-to-date details on current interest rates.

You should also know that if your credit score is in the mid- to upper-700s or higher, there's a strong chance you'll qualify for the most competitive rates that mortgage lenders in your state are offering. But if your score is lower -- say it's hovering in the mid-600s -- then you could get stuck with a higher interest rate on your mortgage. And that could give you less buying power.

Should you buy now or wait?

Home prices have risen a lot over the past year, and one big reason is because inventory is very low. Any time there's a shortage of a given commodity, demand tends to soar and prices tend to follow suit. That's what's happening in the housing market today.

If you run the numbers and find that you can afford a home in your ideal neighborhood, there's no reason not to purchase a home this year -- especially with mortgage rates being so competitive. But if you can't afford a home where you really want to live, then it pays to put your search on hold and wait for more properties to hit the market.

Remember, just because the median home price is $385,000, it doesn't mean that's what a home will cost in the areas you're considering. You may find that prices where you're looking are much higher or lower. Use that information, as well as the numbers you crunch, to guide your decision.