How to REALLY know how much house I can afford?

6 Responses to “How to REALLY know how much house I can afford?”

1. angel_of_love_1981 on February 10th, 2007 2:33 am

   The best and easiest way to figure out how much house you can afford is to contact a mortgage representative to be prequalified for a loan. They will break down all your options and show your final monthly payments.

2. zyberianwarrior on February 13th, 2007 9:10 am

   take all of your bills add them up then subtract it from the total MONTHLY you make. thats your difference lenders wants you to NOT go over 50% of what you make.

   The only way you can get around PMI now is 20% down (no exceptions to this one now)

   Medical, dental 401k is tax exempt so you have a lower tax base in having these (smart move) but most people do not have the luxry you have that is why they just settle on gross pay not actual.

3. kristy s. on February 15th, 2007 1:36 pm

   Hi,
   First of all this is a great question. The x% that you are referring to is typically what lenders use to qulaify you, not necessarily what you can afford or are comfortable with. There are so many differen’t components that go into mortgages and financing a home that I couldn’t know what would be right for you from just the above paragraph. What I will tell you is there are several lenders/banks out there that have loans, rates, and programs that will fit into your plans and what I recommend you do is contact myslef or someone you know to go through this step by step.
   And by the way, the 2nd answer posted is incorrect. There are several lenders that have loan programs where they pay the mortgage insurance, and the other way to avoid it is by having 2 loans so the first is only up to 80%.
   E-mail me if you have any other specific questions about this.
   p.s. This couldn’t be a better time to buy! This is the kind of market that buyers have been waiting for!

4. james on February 17th, 2007 10:55 am

   Do not, under any circumstances, go to a Mortgage or Real Estate sales person for advice.

   Your situation is ideal at present. It is unwise to go above 25% of your net pay for your housing. I realize your dilemna. You can’t afford much for what you are paying. This is because you are ignorant of the real estate market in your area. Ignorant doesn’t mean you are dumb, it means you are unaware. You will need to find a real estate investors group. They will be a motherlode for market info. Beware, as some of these will be trying to sell you a property as well. Generally, these people are very interested in telling others how to go about purchasing “distressed sales”. They spend years perfecting their craft and they love to share with interested people who also love good deals.

   There will be a lot of competition. You will need to be prepared with a good down payment and prequalification for a purchase. Ideally, you need 20% down and the remaining 80% to be 25% of your gross or less. You will find that there are unbelievable properties for sale that you can afford in neighborhoods you would like to live in. Patience is the key as well as looking at the property with a jaundiced eye instead of the American dream goggles.

   Finally, find an appraiser, you have to hire one for a purchase anyway. Pick his brain about typical property values in a neighborhood you are looking at. Remember, you make your money when you buy. The appraiser will be able to give you an idea of the neighborhoods baseline and whether or not you are getting a good deal.

5. Open Book Advisors™ on February 18th, 2007 10:21 pm

   Can you Afford………..and can you qualify are two different things.

   Affordability is subjective. While 1 person can afford 2500 mo. another person may think that is insane.

   The forumula you are speaking of has nothing to do with affordability. It is the formula that lenders use to qualify someone for a loan.

   Affordability is you knowing the lifestyle you want to live, what you want to save, what ammenities you will live without and deciding just how much you are willing to pay for housing yourself. They are two different creatures.

   The advise to not talk to a mortgage person is poor.
   Your mortgage person needs to know what your goals are, what payment you are comfortable with in order for you to devise a plan to get there. If you want a certain payment you either have to buy in a cheaper area to live or come in with a big down payment to keep your payments low.

   Investment groups are started by and full of people trying to sell loans. There are better places to learn. Try

   Good Luck

   OBA™

6. matzael on February 19th, 2007 6:24 pm

   The reason they say gross pay instead of net pay. In theory that percentage already takes into consideration that taxes are coming out. They also assume that you can cancel insurance/401k contributions if you have to in order to make your bills, those are all voluntary. Non-voluntary deductions (garnishment, child support payments) are taken out of your income before they figure the ratio.
   As you’ve probably been told this is the number the lender will use to qualify you for the amount. Please only use this as a guideline. The main question is if you, personally, can budget the payment. If you don’t want to cancel your voluntary deductions or change your lifestyle, the number you can really afford will probably be different.
   The real way to figure how much you can afford is to get your mortgage payment on a 30 year fixed loan, add in your taxes and insurance, and have all that add up to what you’re able and willing to invest in a home. You can find a decent calculator here:
   That will figure out payments on the mortgage for you.

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