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Working The Numbers
The best way to get a reliable idea of how much home you
can afford is to talk to a lender - because with all the innovative mortgages available
today, there is no simple, accurate formula that can tell you how big a mortgage you can
qualify for.
There are simply too many different factors involved,
including your own financial situation, the kinds of mortgages available in your area, and
variations in the qualification guidelines for different mortgages.
However, you can use your total monthly household income to
make a very rough estimate. Generally, your monthly housing costs (including your mortgage
payment, taxes, insurance and other fixed expenses) should be between 25 and 28 percent
of your total monthly income. Your monthly housing costs plus other long-term debt
(expenses extending more than 10 months into the future) such as car or other installment
loans should not exceed more than 36 percent of your gross (before taxes) monthly income.
Let Your Lender Help You
The easiest, most reliable and most accurate way to
determine how large a mortgage you can qualify for is to spend some time with your
mortgage lender.
He or she works through mortgage numbers every day, and can
help you work out the numbers that apply to you fairly quickly.
What's more, you and your lender can also use this meeting
to discuss the types of mortgages that might work for you. You could be pleased to
discover that some special mortgages apply to your situation. But in any case, this a
great opportunity to consider your mortgage options in more relaxed circumstances, before
you've actually signed a contract to buy a home.
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