What Can You Afford?

    How much can you pay each month for the long term expenses of owning a home?

1. Your gross (before taxes) income each year: $_______

2. Divide by 12 (to calculate monthly income): $_______

3. Multiply your monthly income by 28% (.28) $_______ Estimate #1

4. Multiply your monthly income by 33% (.33) $_______ Estimate #2

The result in #3 above is the estimate of your maximum house payment with most loans. The result in #4 above is the estimate of your maximum house payment with some loans.

1. Your gross monthly income: (from #2 above) $_______

2. Multiply # 1 by 36% (.36) (A)_______

3. Multiply #1 by 38% (.38) (B)_______

4. Your total monthly debts*: (C)_______

5. Now subtract C from A and write the answer: $_______ Estimate #3

6. Now subtract C from B and write the answer: $_______ Estimate #4

The result in #5 above is an estimate of your maximum house payment with most loans. The result in #6 above is an estimate of your maximum house payment with some loans.

*In your debts, include any payments you'll be making each month, including installment loans, charge cards, car payments, etc.

  • How much "house" can this buy? See the chart How Much Would Your House Payment Be? Find the current interest rate anticipated for your loan on the top column, look down that column until you find your estimate of your maximum house payment. Then look to the column on the far left for the corresponding loan amount. To determine the house price add your down payment amount to this loan amount.
  • Tax Considerations: You may wish to calculate potential tax savings to determine the new after-tax housing costs you can afford. If you itemize deductions you may be able to deduct property taxes, loan origination fees, and interest payments on the loan secured by the new property.

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