How much house payment can I afford?

Here is a simple calculation to help you find out how much of a house payment you can afford.

a. Gross Monthly Income                    __________

b. Multiply by .36                                   __________

c. Other current monthly bills          __________

d. Subtract c. from b.                             __________  

Line d shows your available monthly housing total.

Please keep in mind that your available housing expense needs to include your monthly Principal, Interest, Taxes, Insurance, and PMI* obligations.

As a homeowner you will also want to make sure you have set aside reserve funds for times in which you need to replace something in your new home, or even for those long winter months where you will need fuel to heat your home.

* - PMI stands for Private Mortgage Insurance, and is needed for any Real Estate Lending Transaction where the loan amount exceeds 80% of the current market value of the property.  This monthly premium is paid to a Mortgage Insurance Company to supply coverage to satisfy the Lender in case of default on your loan.