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How Much Can I Afford?
The shortest answer to that question is: it depends on a number of factors. The most important are your gross household income, your down payment and the mortgage interest rate. Lenders will also consider your assets and liabilities. Your own lifestyle and debt comfort zone also come into play.
Use the Mortgage Calculator below to estimate the maximum mortgage you can afford. This calculation is based on two simple rules that lenders use to determine how much of a mortgage you can afford.
The first rule is that your monthly housing costs should not exceed 32% of your gross monthly household income. Housing costs include monthly mortgage payments, taxes and heating expenses. If applicable, this sum should also include half of monthly condominium fees.
Secondly, your entire monthly debt load should not be any more than 40% of your gross monthly income. This includes housing costs, and other debts such as car payments, personal loans, and credit card payments.
This very key piece of information will directly affect the location and kinds of homes available in your price range. By being prepared you can avoid any surprises and simplify your home buying experience. Experiment with numbers!
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