As a general rule of thumb, your Housing Expense Ratio, which is principal, interest, taxes and insurance shouldn’t be more than 25% to 28% of your pre-tax monthly income. Fannie Mae and Freddie Mac's automated underwriting systems will approve higher Housing Expense Ratios.
Your Debt-to-Income Ratio should be no more than 36% of your pre-tax monthly income. This is the ratio between how much you owe and how much you earn. By the way, most lenders will accept a 43% to 45% Debt-to-Income Ratio. And there are a few that will accept even higher ratios.
“Qualifying for” and ”can afford” are two different things. Shopping for a home within your budget will save you a lot of heartache now and in the future.
If you’d like help determining how much mortgage you can really afford, I suggest you speak with a mortgage professional.
C2 Financial Corporation
2845 Moorpark Avenue, Suite 209
San Jose, CA 95128