How much house can you afford?

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Q:  What is it maximum price you can pay for a home?
A:  Generally speaking, the maximum you can afford is equal to your down payment plus the largest loan you qualify for.

A quick way to estimate the size of that mortgage you qualify is to take your gross monthly income (before taxes and other deductions) and multiply it by .28. This works out to just over 1/4 of your gross income.

Mortgage companies use qualifying ratios to determine how much to lend you. Most mortgage companies use approximately a 28/36 ratio. The first number is the percentage of your gross income that the lender would consider acceptable as a monthly mortgage payment (i.e. if you make $6,000 per month, 28% of that is $1680 per month).

The second number is considers all debt payments, not just the mortgage. (i.e. if you make $6,000 per month, but also have a $250 a month car payment, 36% of $6,000 is $2,160, minus the $350 car payment equals $1810).

These numbers will vary greatly depending upon your debts.

Calculate your loan payments