How Much Can You Afford?

This is the 2nd step to buying a home.

A home is a big purchase.  

It's probably the most expensive thing you'll ever buy, and there are lots of expenses you might not even know about.

Cost of buying a home:

One time costs

  • Down payment
  • Legal fees
  • Inspection fees
  • Taxes

Monthly costs

  • Mortgage
  • Utilities
  • Maintenance
  • Insurance
  • Property taxes

Everybody's total costs are different, but chances are good you won't have that much money saved up (most people don't).  Hopefully, you have enough for a nice down payment, but for the rest...

Do you need a mortgage?  

Let's determine how much the bank will lend you.  The first step is to understand how much you can afford each month.  This is determined by using two lending principles:

  1. Gross Debt Service Ratio (GDSR) Calculation:  This lending principle simply states that your monthly housing cost should not exceed 32% of your gross monthly family income.
  2. Total Debt Service Ratio (TDSR) Calculation:  This lending principle summarizes that your monthly housing cost and payments on all of your other debts (including loans, credit card and lease payments) should not exceed 40% of your gross monthly income.


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Julie D. Martin

Julie D. Martin

Sales Representative
CENTURY 21 Home Realty Inc., Brokerage*
Contact Me

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