How Much House can I Afford?
How Much House can I Afford? By: Greg McKinney Mineola TX Buying a house is exciting, but before you look for your dream home, you should know how much home you can afford. The typical rule is to keep your total debts including your new mortgage at 36% of your gross monthly income (income before taxes). But there are a few other factors you must consider. Calculating your Debt-to-Income Ratio Your DTI is the comparison of your monthly debts to your income before taxes. Your monthly debts consist of any student loans, personal loans, car payments, minimum credit card payments, and the total mortgage payment (principal, interest, taxes, and insurance). Keeping your DTI at 36% ensures financial affordability and security while allowing you to borrow money to buy a home. Most banks, however, go up to a 43% DTI if your other qualifying factors allow it. The Down Payment Another factor in how much house you can afford is your down payment. Your down payment does two thi