How should one calculate how much house they can afford, on the back of an envelope?

Asked by Trulia Austin, Austin, TX Thu Nov 29, 2012

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7
Perry Hender…, Agent, Austin, TX
Sun Dec 2, 2012
If you have no debt, try to stay under a payment that is no more than 30%-35% to your total monthly income.
0 votes
houseweetitis, , Atlanta, GA
Fri Nov 30, 2012
I do not recommend buying a house that is on the back of an envelope, no matter how much money you have.
0 votes
Tommy Burris, Mortgage Broker Or Lender, Baton Rouge, LA
Fri Nov 30, 2012
Multiply gross monthly income by .43
Subtract from that your monthly payments on auto/credit card/ect
The remainder is available for housing payment....

This is a quick and easy way to calculate whether a monthly housing payment will fit in your debt ratios.



Tom Burris
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0 votes
Paul Puig, Agent, AUSTIN, TX
Fri Nov 30, 2012
How much loan you qualify for is based on your DTI (debt to income ratio). Once these figures
are established they are inputted to a software that renders an "auto approval" for a federally insured loan.

Since different type loans have their various criterias and interest rates there could be a large variation with your casual figures vs lender researched calculation.

Any comments or questions, let me know.
0 votes
My NC Homes…, Agent, Chapel Hill, NC
Fri Nov 30, 2012
One shouldn't make such a calculation the back of an envelope. One should contact a legitimate mortgage lender, sit down with them and have an intelligent conversation. Backs of envelopes are for doodling, jotting down phone numbers, perhaps making a grocery list. Buying a home is a major financial decision.

Secondly one should not confuse what one can afford with what one may really need. I can afford more house than I currently live in as can Warren Buffet for example, yet neither of us chooses to buy more house than we need. Living well within one's means pays long term dividends.
0 votes
Kevin Cottre…, Agent, Saint Louis, MO
Fri Nov 30, 2012
There is quite a difference between what can afford today and what often buyer's are comfortable purchasing. To wit, many buyers are opting to move down market below what their maximum 'front' and 'back' (total) debt ratios would allow.

Ratios for lenders one should consider are basically built on a model of 30% of Gross Income for house payment / 50%of total payments (including all debt payments with full payment for house (payment including taxes and insurance).

Best recommendation is to work with a LOCAL lending expert such as Matt Dean at Security National Mortgage who won't try to convince you to max out your purchase ability and move you beyond where your're comfortable.

Matt Dean - 512-617-9436 [link to his website below]
0 votes
JOSEPH E JAR…, Agent, Austin, TX
Thu Nov 29, 2012
Sure, or they can speak to a REALTOR® or Lender and do it right!!
0 votes
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