If you are interested in making a $83,900.00 down payment and hope to get a 30 year loan with a 3.250% interest rate, you can afford to purchase a home that costs $419,700.00 if your gross household monthly income is $8,000.00 and your total monthly payments on your other bills is no more than $1,107.00. Using all of this information, you can determine how much you might afford to pay for your mortgage. Back ratio is a percentage of your gross income that you can spend on your housing expenses plus cost of servicing your other outstand debts.įront / back ratios with values of 28-33 / 36-42 are considered conservative these days, values bigger than 35 / 45 called aggressive and not recommended for use. Front ratio is a percentage of your gross income that you can spend on all housing related expenses, including property taxes and insurance. You will also need to have an idea of how much the taxes will be, as well as the insurance and PMI costs.Įstimated front and back ratios helps you to limit your housing and necessary living spending. In addition, you will need to consider how much money you can put in down payment, the loan interest rate, and the length of the loan. To find this out, you will need to take a closer look at your total monthly household income as well as your regular monthly debt payments. Your Results in Plain English ( Switch to Financial Analysis)īefore you start looking for a new home, you need to have an idea of how much you can afford to pay for a home.
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