Determining How Much Mortgage is Right For You
2 to 3 times your yearly income before taxes.
To understand how that rule applies to your particular financial situation, prepare a family budget and list all the costs of homeownership, like property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as day care costs.
How Much Money You Will Be Putting Down You will need at least 20% down if you don’t want to pay private mortgage insurance.
Consider your overall debt. Your home loan + interest + taxes + insurance shouldn’t total more than 28% of your annual income before taxes. Also add in other loans, mandatory monthly expenses to NOT equal more than 41%. Basically your lender wants you to have about 60% of your monthly income to be available for other expenses.
What Are You Paying For Rent? Can you afford about one-third more than your current rent payment? Then multiply 1.33 x Your Rent to come up with an estimate of your mortgage payment.
Link: How Much Home Can You Afford?
Link: Freddie Mac* Info on Home Affordability
* Who is Freddie Mac? Freddie Mac is a government-sponsored enterprise (GSE) chartered by Congress to stabilize the nation’s residential mortgage markets and expand opportunities for homeownership and affordable rental housing. Our statutory mission is to provide liquidity, stability and affordability to the U.S. housing market.