What price home can I afford?
As a “rule of thumb” you can afford to buy a home equal in price to twice your gross annual income. More precisely, the price you can afford to pay for a home will depend on six factors:
Your housing income-to-expense ratio should fall in the 28 to 33 percent range. Some lenders will go higher under certain circumstances. Your total income-to-debt ratio should not exceed 34 to 38 percent of your gross income. Always check with your lender to verify what a lender will be willing to give you for a mortgage.
- Your income
- The amount of cash you have available for the down payment, closing costs and cash reserves required by the lender.
- Your outstanding debts
- Your credit history
- The type of mortgage you select
- Current interest rates