Can We Afford to Buy



Before you start actually going out and looking at homes, it is a good ideas to determine what you can afford.  It is a disappointing experience to fall in love with a house only to find out that your lender will not approve you for the amount of money you need.  It is far better to know in advance what price range of houses to look at.

The first step in determining how much you can afford to spend is setting down and taking a look at your income and expenses.  The maximum a mortgagor is allowed to pay annually in PIT (principle, interest and property taxes) is 27% of your pre-tax income.  You will then need to factor in the cost of any other fixed long term monthly payments that you have.

Your "Total Debt Service" ratio can be as high as 44% depending on your credit history.  Total Debt Service (TDS) is the percentage of income which is the maximum amount that a mortgagor is allowed to pay annually in principal, interest, property tax (PIT) and all other debts.  Any lender that you approach will want to assure themselves that any mortgage they approve for you will be within these guidelines. 

The next step is to determine how much money you will need as a down payment and for closing costs.  Add that down payment and the mortgage amount together.  You and your REALTOR® will then know what price range you are looking at.

Then .... Happy House Hunting!!!!


Jo-Anne Larre

Jo-Anne Larre

CENTURY 21 Fusion
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