How Much House Can You Afford?

2581 Words Apr 8th, 2016 11 Pages
How Much House Can I Afford?

If you 're thinking about buying a house, there are a few things to factor in before you fall in love with your dream home. Using a home affordability calculator can help you not only determine how much of a mortgage you can afford, but help you narrow down your search which is important when dealing with the hot Silicon Valley real estate market. Using the calculator below will help to determine your potential mortgage based on your monthly expenses, income, and other factors like your projected property taxes, home owner 's insurance and other payments. This can give you an idea of what you can afford and what will fit your budget.

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Determining how much house can you afford

The ratio for your debts-to-income
Your mortgage lender will want to know how much of the money that you make each month will go towards your bills (debts). When they divide your debts by your monthly income, it gives them a percentage. Included in your debt total are all your monthly expenses. These will include your rent or current mortgage, your car loan, insurance, student loan payments, credit card bills and other expenses. For example, if you have payments of $2,500 every month, and you make $10,000 every month, your debt to income ratio would be .25%, or $2,500 / $10,000 = 0.25.

Your front-end ratio
Another calculation your lender will determine is how much your house payment (principal), interest, property taxes and…
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