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How much can I afford for a house?

How much can I afford for a house?

How much can I afford for a house?

Bigger down payments can mean better mortgage rates because lenders taking on less risk by giving you less money and making sure you have more equity in the home. The loan-to-value ratio, or LTV, takes into account your down payment. The bigger the down payment, the lower the LTV and the less risk the lender will assume. Imagine you have a definite budget in mind for buying a house. It’s a lot of money and you don’t have time to waste, so you need to make sure your house will fit within that budget. It’s time to determine the square footage of your house and make sure the house’s square footage does not exceed the budget.

Afford

Your house will likely be your biggest purchase, so figuring out how much you can afford is a key step in the home-buying process. The good news is that coming up with a smart budget is pretty straightforward and not too time-consuming — especially with the Bankrate Home Affordability Calculator. Most financial advisors agree that people should spend no more than 28 percent of their gross monthly income on housing expenses and no more than 36 percent on total debt — that includes housing as well as things like student loans, car expenses and credit card payments. The 28/36 percent rule is the tried-and-true home affordability rule that establishes a baseline for what you can afford to pay every month. For example, if you make $3,000 a month ($36,000 a year), you can afford a mortgage with a monthly payment no higher than $1,080 ($3,000 x 0.36). Your total household expense should not exceed $1,290 a month ($3,000 x 0.43).

Depending on where you live and how much you earn, your annual income could be more than enough to cover a mortgage or it could fall short. Knowing what you can afford can help you take financially sound next steps. The last thing you want to do is jump into a 30-year home loan that’s too expensive for your budget, even if you can find a lender willing to underwrite the mortgage. that lenders will use to assess how much house you can afford is 36/43. This ratio says that your monthly mortgage costs (which includes property taxes and homeowners insurance) should be no more than 36% of your gross monthly income, and your total monthly debt (including your anticipated monthly mortgage payment and other debts such as car or student loan payments) should be no more than 43% of your pre-tax income. (Source: www.zillow.com)

 

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