Home Buyers >> Decisions

How Much Can We Afford?
Lenders use established formulas for helping determine what price home you can afford to purchase.

Depending upon the lender and the type of loan, you will be required to come up with 5 to 20 percent of the purchase price as a down payment on your new home.

Lenders then apply slightly different formulas for determining your "total monthly housing costs" in order to establish your qualifications for securing a home loan. Some lenders figure in basic amounts for maintenance and utilities in addition to your Principal, Interest, Taxes and Insurance (P.I.T.I.) plus association dues, and any other fixed costs.

Generally, lenders allow no more than 25 to 35 percent of your gross monthly income for P.I.T.I., and as much as 45 percent  for both your P.I.T.I and monthly debt payments combined. more...