There are a lot of guidelines and rules of thumb when trying to figure out how much home you can afford, or how much you can qualify for. You may have heard –
- You can afford a home that costs about 2 ½ time your annual income,
- Take your gross monthly income and multiply it by .28 for a maximum monthly home payment,
- Take your gross monthly income and multiply it by .36 for a maximum total monthly debt including housing
We recommend that before you begin to look for a home, you meet with a lender to start the preapproval process. The lender will require key information from you regarding your employment, income and finances. After the lender has reviewed and verified this information, a pre-approval letter will be issued. The preapproval letter is submitted with the purchase agreement.
There are many loan programs to choose from and your lender will help you make the best decision, based on the information you’ve provided.
Talk to your REALTOR® about any questions you have with either of these pieces of the home buying process. They work with these situations every day and can give you honest feedback. In the meantime, feel free to use the tools provided on this website to get an idea of what direction you may be heading.