Wednesday, 13 October 2010 22:27
Experts suggest between 29 – 33% of your income should go toward your mortgage/rent. A more conservative approach is 25%.
A lot of it depends on your other monthly bills. If your car is paid for, you can probably afford the higher amount toward living expenses. If you have student loans or credit card debt, the more conservative approach would fit you better. The amount also depends on the housing market.
Most lenders will not give you a mortgage greater than 33% of your income. You want to make sure that amount fits your budget rather than getting a mortgage for that amount because they said you can.
To figure the amount you can spend toward living expenses:
Take your gross monthly income: example - $4,500
Multiply by housing ratio: example - 30%
Your total monthly mortgage payment including principle, interest, property taxes and insurance (and PMI if over 80%) should be no greater than: $1,350