How Much House Can You Afford?The following steps will give you an idea of housing affordability. Step 1: Gross monthly incomeAdd together the total pre-tax amount of all verifiable monthly household income (including salary, overtime, bonuses, interest, pension and/or social security benefits). Step 2: Monthly debtAdd together the current monthly payment amount for all debt (including credit cards, car loans, installment loans, student loans, alimony and/or child support). Step 3: Expense limitMultiply the gross monthly income by .38 Step 4: Funds available for housing paymentSubtract the monthly debt amount from the expense limit. The funds remaining are what is available to be spent on the housing payment (including mortgage principle and interest, taxes, insurance, as well as homeowner’s association fees and mortgage insurance if applicable). |