How Much Can You Afford To Pay - Example
In this example we assume the borrower is earning $60,000 per year and making $400 per month in minimum monthly payments on his or her debt. This debt could include a car loan, credit card debt or other financial commitments. We also assume that the borrower gets a 30 year mortgage at a 7.25% interest rate and can make a down payment of 20%.
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When you press the Calculate button in this example you'll see that the maximum loan amount the borrower will qualify for varies widely depending on the debt-to-income ratio limit for the mortgage offered by their lender. The debt-to-income ratio is the total minimum monthly payment on the borrowers' debt divided by their gross income.
At a 28% debt-to-income ratio the borrower may qualify for a loan amount of $154,774 while at an extremely risky 55% debt-to-income ratio the borrower may qualify for a loan amount of as much as $304,022. Based on the required down payments, the maximum purchase price for the home would vary between $193,468 and $380,027!
Borrowers should find a mortgage that fits within their risk comfort level and their means. Click on the Calculate button in the form below to see the maximum purchase prices or enter your own information.
