Use an online mortgage affordability calculator to determine how much financing you can afford, according to Bankrate. Enter your total monthly income and the information about the home purchase such as the down payment, term of the loan, interest rate, property taxes and insurance premiums.Continue Reading
Enter your other expenses, such as auto financing and payments on credit cards, alimony requirements and other outgoing costs. The calculator indicates how much you can afford to pay each month on the mortgage and the highest purchase price that you should consider, as stated by Bankrate.
Mortgage calculators use debt-to-income ratios to determine how much potential applicants can afford. The magic number is 43 percent, including the pending mortgage, for applicants who want to receive approval, notes the Consumer Financial Protection Bureau. A lender with less than $2 billion in assets and that extended a maximum of 500 mortgages in the prior year can extend a qualified mortgage to applicants with a higher debt-to-income ratio, but larger lenders cannot extend qualified mortgages. They can still approve loans, but it isn't considered a qualified loan. These lenders still have to conduct reasonable due diligence in good faith to determine that you have the means to satisfy the terms of the loan, as stated by the CFPB.Learn more about Credit & Lending