How much house can I afford?
When evaluating how much you can afford for your home and mortgage, lenders usually use two rules of thumb:
1. Your maximum monthly mortgage payment should not exceed 28 percent of your gross (pre-tax) income.
2. Your maximum debt load, including your mortgage payment, should not exceed 30 percent of your gross income.
These ratios are typical of those required to secure a conventional mortgage. Lenders will be able to supply details about other types of mortgages, such as FHA or VA loans, which offer more flexible qualification standards. There are many types of mortgages and financial tools available that provide flexibility in interest rates, terms, and down payment requirements.
What’s My Price Range?
Determining how much house you can reasonably afford, and the size of your mortgage, requires carefully evaluating:
- Savings—how much have you set aside to cover a down payment on your home, as well as your closing costs?
- Affordability—how much can you safely borrow, and still meet all your financial obligations?
A trained buyer’s representative can answer all your questions about factors to consider in evaluating your financing options and determining a reasonable price range for your home purchase.