How do you know how much house you can afford?
February 19, 2008 · Print This Article
alm121804 asked:
I’m not looking for a really specific answer, just a way to get a broad estimate. For example, I’ve heard things like no more than 25% of you gross income. That type of thing. Thanks!
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I’m not looking for a really specific answer, just a way to get a broad estimate. For example, I’ve heard things like no more than 25% of you gross income. That type of thing. Thanks!
Caffeinated Content
Josh Dunaway has been a certfied Realtor in the suburban Chicagoland area for over 20 years. Aside from starting his own real estate company, he also owns a mortgage company as well.
i prefer to do all the math…….if its no more than 25% of your income, but you buy a new car every year, or vacation a lot…..or dont have a budget, that rule goes out the window.
add up your annual expenses…..then do the math…….dont forget property taxes.
If you go to, they have an affordability calculator. You plug in your salary, your bills,etc and it tells you how much of a house you can afford. Good luck…its a tough house buying world out there!
3-times your annual income.
There’s a pretty neat calculator on Bankrate.com that gives you a BALLPARK estimate, based on a number of variables. It’s probably one of the most comprehensive ones out there IMO. Enjoy!
It has to do with your debt to income ratio and your annual income. Try for a mortgage calculator.
It is baised on your income and debts. Debt to income ratio .The max is about 39% for your house. If purchasing a home do not purchase anything on credit until home closes.
I thought payments/debts should be no more than 36% of your income. But, I’d say go to Bankrate.com or other financial site (I think yahoo finance has a calculator too).
Find a mortgage caclulator.
Also, calc payments based on what rate you can get, how much you can put down. And think about whether or not you can afford it–
And, don’t forget that if you put down less than 20% you’ll have to pay PMI (priv. mortgage insurance). That’ll add to your payment too.
There is a lot more to qualifying for financing besides just determining how much payment your gross income qualifies to support.
A consultation with an experienced mortgage banker will tell you not only how much you can qualify for but educate you on the process so that you may make informed decisions and end up with the loan that is exactly right for you.
It really not matter what a person believe, it what the Bank Loaning the money believe. You need to go to your Bank and Pre-Qualify. It is best to actually tell the truth of your outstanding Debts, one, they will check your Credit Report. What this do, the Bank will tell you how much House you can Buy, regardless of what you think. Then you can be looking at what the Bank loan for and not waste time on a house you can not get a loan for.
Now, say you qualify for an $80,000 Home. But, say you have $10,000 saved up. You can buy a $90,000 Home and pay your $10,000 down, but, the Bank would only go the $80,000. This just an Example and not consider if you use a conventional loan, VA loan or FHA loan. The type loan will dictate what the Bank want to see you pay down. and your closing costs involved.
there are all sorts of ways to estimate how much you can afford.
the best thing I can tell you is to sit down and add up all the monies you have. figure out how much you want to give up and change in your life. If you buy a new car every year then you may have to give it up. You can figure on adding the money you pay for rent to the amount you can afford for a monthly payment. If you are due a raise, figure that, if your spouse works add that in, but be careful, if your spouse becomes pregnant or sick or just wants to quit work, figure that. You can use the amount you save every year also, but don’t count on all of it. There are things that will come up and unforeseen things happen where you need a cash reserve.
work hard to justify the money needed to buy. Now is a good time to buy, foreclosures are up and you may find a bargain out there. At least you know you are building equity and not just throwing the money away. Good luck and hope you can swing it.
Don’t think anyone has mentioned a down payment. If you have huge down payment that changes the picture. Like others have said about 35% of your income for housing.
It is a buyers’ market and rates are still very low. You should be able to get a good deal now.
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