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How much home can you afford?

Customary ratios for a conventional mortgage

require that:

  1. monthly mortgage payments cannot exceed 25% of the borrower's monthly gross (meaning before-tax income) and
  2. 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.

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Monthly mortgage payment... View the full answer

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