Every man nurtures a dream of buying a home of his own. As soon as the thought arises, the first question that comes to his mind is “How much house can I afford”. Borrowing money to buy a house can be a daunting experience because many experienced buyers as well as first-time buyers remain confused with this question of how much house or mortgage loan he can afford.

How much house can I afford Calculator

This is a very useful tool that helps to find out the amount of loan you can afford. It is an affordability calculator where you have to enter your monthly income, minimum monthly payment on debts and the amount of cash you can put forward to buy the new house. You just need to choose the interest rate and estimate the credit rating. By giving this information, the calculator will calculate the amount of loan, the estimated payment and the size of the loan. So, here you get an answer to your question, “How much house can I afford”.

2 Ratios deciding the affordability of house

Most mortgage lenders are primarily concerned with your ability to repay the loan. They will check your credit history, monthly gross income and the amount of money you can arrange for a down payment, to determine whether or not you qualify for a loan. Mortgage lenders typically use 2 ratios to accurately calculate how much you can afford to spend on your mortgage.

1.Housing expense ratio: The housing expense ratio, better known as front-end ratio, determines how much of your gross monthly income will go towards paying your mortgage. The mortgage lenders also recommend that your monthly mortgage payment should be less than 28-31% of you gross monthly income.
2.Debt-to-income ratio: The debt-to-income or back-end ratio tells you how much of your gross income will go towards paying all your debt obligations including mortgage, child support, credit card bills, alimony etc. Mortgage lenders check whether the amount of your total debt is larger than 30-40% of your monthly gross income.

Don’t you think that this question “How much house can I afford” is no longer a nerve-wracking one? Use the affordability calculator and the 2 ratios to get a simple answer to your question.