What Can You Afford?

In addition to having the cash for the down payment, closing costs and good credit history, the mortgage lender will want your house payment and other debts to conform to accepted qualifying ratios. While 28%/36% are the most common, some loan ratios differ.

Column A    Column B

Annual income before taxes (gross): $_____________

Divide by number of months: ÷ 12
Divide by number of months: ÷ 12
Monthly gross income: =_____________ =__________

Many lenders will not allow you to spend more than 28% of your x .28

monthly gross income on housing expense: (column B)

Maximum monthly housing expense allowance (column B) =__________

Many lenders allow 36% of monthly gross income for long-term debt: x .36

Long-term monthly expense allowance: =_____________

Figure out your monthly long-term obligations below, and

subtract it from the allowance:

child support $_____________

auto loan +_____________

credit cards +_____________

association fees +_____________

other +_____________

total long-term obligations: =_____________

Monthly housing expense allowance: =_____________

Record the smaller figure in Column A or B: $_____________

Estimating about 20% for taxes and insurance, leaving

80% for payment of mortgage (principal and interest): x .80

Allowable monthly principle and interest expense: +_____________

Divide by Monthly Payment Per Thousand Dollars from table (below)÷___________

=_____________

Multiply by 1000: x 1000

Estimated Affordable Mortgage Amount $_____________