Mortgage Payments | Amortization Schedule
Use these free mortgage calculators to compute how much house you can afford.
What does it mean to be house poor? It means that housing expenses eat up too much of your monthly income. Although lenders use exact formulas for determining the size mortgage a typical borrower can afford the results don't mean the payments are affordable for you.
Rule of Thumb
The banks used to say that your mortgage payment could not be more than 28% of your gross income. Total monthly payments on all of your debts could not exceed 36%. Many lenders exceeded these limits which is why many people find themselves in a non affordable mortgage.
These numbers can be deceptive depending on your situation. Think about the future. For example, if your spouse's income is included in your monthly income calculations will you be able to make the payments comfortably only if your spouse continues working. Some people have had to put off family plans because they have a mortgage that is not affordable for their lifestyle.
Can you really afford this house?
Also, if you have or soon will have children in private schools or in college, the money available to pay for your mortgage payment will be greatly reduced. Should you be saving money for college instead of buying a house you can’t afford?
Since mortgage lenders do not ask for this type of information you may qualify for a loan but get into trouble when you start living with the new payments.
To be safe, don't wait for the lender to qualify you for a mortgage. Take a few hours and calculate your own comfort zone. First determine your highest mortgage payment as a per cent of your gross income.
Gross income is all of your income from work, investments, and rent received. Then multiply this number by 28%. Thus if your gross income is $3,500 per month your maximum housing expense permitted would be $980.
Include in that payment the mortgage payment, real estate taxes homeowners insurance and flood insurance if applicable. You should also add in any homeowner or condo association dues.
Using the mortgage calculator:
How much can I borrow? You can arrive at the maximum monthly mortgage payment that is affordable for you. The calculator asks for your total monthly obligations as well as the taxes and insurance you will be paying on the house.