A crucial step in finding the right home is to first
determine how much you can afford to spend on your new home. First, let's
calculate an affordable monthly payment. To calculate this value, we will use
a housing-expense ratio of 33%. This means that 33% of your monthly income can
be spent on mortgage payments, including property taxes and insurances. Take
your gross (before taxes) income each year and divide by 12 to determine a
monthly income. Multiply the monthly income by 33% (.33) to calculate an
estimated monthly mortgage payment.
(gross income)/(12)=(monthly income)X(.33)=Estimated Monthly Mortgage Payment
Example: Bob makes $60,000 a year. Therefore his monthly income is about
$5000. If he has a housing-expense ratio of 33%, his monthly mortgage payment
will be $1650 (5000 X 0.33).
