How much home can you afford?
Customary ratios for a conventional mortgage
- monthly mortgage payments cannot exceed 25% of the borrower's monthly gross (meaning before-tax income) and
- the borrower's total monthly installment loan payments (including the mortgage payment) cannot exceed 33% of monthly gross income.
If you have monthly gross income of $3,500 and student loan payments of $300/mo, how much of a monthly mortgage payment (including taxes and insurance) can you afford?
Hint: calculate both 1 and 2 requirements above, and choose the lower of the two.