|
Use these important formulas to determine how much you can afford to pay for housing. This is how lenders will determine the maximum monthly costs you can carry.
Review the examples to see how you can settle on the best home price for you.
Step 1
Maximum monthly housing costs you can afford Gross Debt Service Ratio (GDS)
| Your gross Monthly salary* |
$ __________ |
| Your spouse'sgross monthly salary |
+$ __________ |
| Other Monthly Income |
+$ __________ |
| TOTAL A |
$ __________ |
| Multiplied by |
x 32% |
| = Maximum monthly housing costs you can afford |
B $ __________ |
This maximum monthly payment includes principal, interest, taxes, heating (P.I.T.H.) and if applicable all of the annual site lease and 50% of the condominium fees.
*Gross salary is your income before taxes |
Step 2
Maximum monthly debt load you can afford Total Debt Service Ratio (TDS)
| Total Monthly Income |
A $ __________ |
| Multiplied by |
x 40% |
| = Maximum Monthly debt service load you can afford |
C $ __________ |
| Monthly auto payment |
- $ __________ |
| Monthly loan payment |
- $ __________ |
| Monthly credit card/Line of credit payment |
- $ __________ |
| Other Monthly payments |
- $ __________ |
| = Monthly income leftfor housing |
D $ __________ |
If the home you want costs more per month than you can afford right now (D),
consider these options:
- lower your expectations and buy a home for less money
- lower your non-housing debt obligations
- and/or raise a larger down payment.
|
Step 3
Maximum Home Price you can afford
| It depends on how much your down payment is and how much you can carry in monthly debt service. That depends on variables such as mortgage rates, your debts and monthly expenses and personal preferences. |
| |
| Your Down Payment (25% Down Conventional Mortgage) |
- $ __________ |
| Estimate Price of Home 4 x down payment = |
$ __________ |
| Assuming 7% interest rate amortized over 25 years= monthly payments of |
$ __________ |
| |
|
Taxes (in monthly installments)
|
|
