06 Dec 2016

What price home can I afford?

As a “rule of thumb” you can afford to buy a home equal in cost to twice your gross annual income. More precisely, the cost you can afford to pay for a home will depend on six causes :

  1. Your income
  2. The amount of money you have available for the down payment, shutting costs and money reserves required by the mortgage provider.
  3. Your outstanding debts
  4. Your credit history
  5. The type of mortgage you select
  6. Current interest rates

Mortgage providers will analyze your income in relation to your projected cost of their families and outstanding obligations. This will be decided by the dimensions of the loan you can borrow. Your housing expense-to-income ratio is established by calculating your projected monthly housing overhead, which contained the principal and interest pay on your loan, belonging taxes and hazard policy. The summing-up of these costs is referred to as “PITI.”

Monthly homeowner association dues, if you’re buying a condominium or townhouse, and private mortgage policy are added to the PITI. Your housing income-to-expense ratio should fall in the 28 to 33 percentage range. 28 percentage of your gross monthly income is allotted toward PITI. 33 percentage of you gross monthly income is allowed for PITI and all long term debt. Some mortgage providers will go higher under certain circumstances. Your total income-to-debt ratio shall not be required to be exceed 34 to 38 percentage of your gross income.

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