How Much Can I Afford To Pay For A Home?

Author: Nancy Tychowski Mortgage Consultant |

This is a question that comes up frequently. To determine your ‘affordability,’ you will need to know your taxable income along with the amount of any outstanding debt and monthly payments. Assuming it is your principal residence you are purchasing, calculate 32% of your income for use toward a mortgage payment, property taxes, and heating costs. Using half of the estimated monthly condominium maintenance fees will be included in this calculation if applicable.

Second, calculate 40% of your taxable income and deduct all your monthly debt payments, including car loans, credit cards, and lines of credit payments. The lesser of the first or second calculation will be used to help determine how much of your income may be used towards housing-related payments, including your mortgage payment.