How Much Home Can You Afford?

As a rule of thumb your total mortgage payment, including insurance and taxes, should not exceed 25-28% of your gross monthly income. The monthly payments on long term debts may limit the mortgage payment you can afford. The total of your monthly payment on long term debts added to your proposed mortgage payment should not exceed 33-36% of your gross monthly income.

A. Gross monthly income $______ x 0.28 = $____________
B. Gross monthly income $______ x 0.36 = $____________
C. Monthly payments on long term debts =  $____________
D. Subtract line C from line B                      $____________
E. Enter the smaller of lines A and D            $____________

Now use the formula to determine how much home you can afford

Purchase Price                                           $____________
Less Down Payment                                   $____________
Equals Proposed Mortgage Amount              $____________

Monthly Principal and
Interest Payment of Mortgage Amount        $____________

Real Estate Taxes
(approx. 2% of purchase price)                  $____________

Homeowners Insurance
(approx. $5 per $1000 of purchase price)   $____________

Mortgage Insurance
(approx.. $6 per $1000 of Mort amount)     $____________

Total Monthly Mortgage Payment                $____________


If the total Monthly Mortgage Payment is higher than line E above, you must select a smaller amount. Recalculate until Total Monthly Mortgage Payment is less than line E.