How Much Home Can You Afford?

Complete the worksheet below to determine whether you might qualify for a loan. But remember, the best thing to do is to visit with a qualified lender that you feel comfortable with. He or she will help you through the process, and give you good advice.

1. Add up the annual gross income of everyone who'll be on this loan:

_______________ (A)

2. Divide by 12 = Monthly Gross Income:

________________(B)

3. Mulitply line B by .28 for Allowable Monthly Housing Cost:

________________(C)

4. Price of home minus your down payment = Loan Amount:

________________(D)

5. Multiply price of home by .0025 for tax & insurance costs:

________________(E)

6. Monthly payment (Call me for the monthly payment or go to http://www.recolorado.com for a mortgage calculator.

________________(F)


7. Add tax & Insurance costs (Line E):

+ ________________(G)

8. Add applicable HOA fees:

+________________(H)

9. Total Monthly Housing Cost:

________________(I)

10. Multiply Line B by .36 for Allowable Monthly Debt:

________________(J)

11. Add up all other monthly debt payments (car, credit cards, etc.)

________________(K)

12. Add lines K and I for Total Monthly Debt:

________________(L)


Is your monthly housing cost in (line I) less than the allowable amount (line C)?
If the answer is no, you must either decrease the price of the home or increase your down payment.
If the answer is yes, the next step is to determine if your debt to income ratio qualifies.

Is your total monthly debt (line L) less than your allowable monthly debt (line J)?
If the answer is no, you probably should pay down some debt before you buy. However, it’s a good idea to talk to a helpful lender who is qualified to guide you. Sometimes, you can still get a loan, although the interest rate may be a bit higher.
If the answer is yes, it’s definitely time to fill out a mortgage application and get it to a lender. You’re on your way!