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Tru Blu

Sep 24

How much house can you afford?

Regardless of where you live, how much you earn or what type of house you are shopping for, as soon as you find out how much the seller is asking, your first reaction might be something like, “Wow! That’s expensive!”

Your initial assessment is correct. With prices rising quickly, particularly in areas like New York and Boston, even starter homes can carry hefty six-figure price tags. Your next reaction is likely to be, “Can I afford that?”

Generally speaking, most prospective homeowners can afford to mortgage a property that costs between 2 and 2.5 times their gross income. Under this formula, a person earning $100,000 per year can afford to mortgage between $200,000 and $250,000. But this calculation is only a general guideline.

For a more sophisticated answer, read this article:
http://www.realestateabc.com/loanguide/afford2.htm

If it’s still giving you a headache, try this free online Debt-to-income ratio calculator: http://www.bankrate.com/calculators/mortgages/ratio-debt-calculator.aspx