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How do you find out, how much you can afford?

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Daniel Reynolds, "Broker Executives"

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There are several ways to calculate this. The recommended way without having to call a Loan Officer is to take the highest payment you feel comfortable with and subtract about 150.00 for taxes and insurance. So 1400 payment per month minus 150 taxes and insurance would be 1250 Pi payment. Then take that amount x 175= 220k. Which based on 30 years 5.1% APR is your overall purchase buying power?This is one method. Please feel free to share any other methods. 
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March 26 - Southeast
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corrie robinson, "corrie robinson"

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The best way is to contact a mortgage rep that you are comfortable with and give Them your income and debt etc They will be happy to tell you what price range you qualify for A Realtor can also do this
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March 26
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sunnyview

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I think that undershooting the qualification ratios often makes sense especially in unstable markets. I think you can use online mortgage qualification calculators like the one at dinkytown to find your comfort range along with a very detailed budget calculator like this one here to see what you really spend every month. You can see what you have to spend to buy without changing your current spending habits. I think it is a mistake for people to think that when they buy a house that they will somehow change their spending patterns. I don't know about anybody else, but after I bought my first house I was happy that I was not up against my maximum qualification amount every month. Owning is more expensive then renting in terms of unknown costs like having a plugged up drain. The extra wiggle room in the ratios can be invaluable on a monthly basis.
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March 26
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Lady Chattel

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Do it yourself, list all your bills and payments and figure out what you can comfortably pay per month for a place to live with all the added expenses of being an owner.   A mortgage guy will give you a number that will tie a noose around your neck, even in times like today.  

My income says I can buy $475K +++ and well based on my paycheck deductions and savings contributions there is no way I could finance that kind of home even with a 20% down, so the whole 3X yearly income is vague in nature and should not be treated as set in stone. Even so in my area the avg home is still price well above that and the avg income for my area is $107K........still a long way to fall INHO. 
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March 26
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Carol Bennett, "Carol Bennett"

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I would suggest you seek out a LOCAL and reputable mortgage man. Talk to people you know. There is nothing better than a good referral.  Typically in this day and age, you can spend up to 41% of your total gross income for your TOTAL debt load ... which would include any debts you have plus your monthly mortgage payment.  Instructions are confusing so see a local mortgage person. Once they give you a monthly number, then it is for YOU to decide if it is comfortable for you. You need not go the limit. I always recommend to my buyers that they "back off" that number to make the payments more comfortable. What has gotten this country into trouble is that too many people wanted more than they could realistically afford!
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March 26
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Bette Defarm

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Could I trouble you to tell me why so many agents create threads that ask a question which they then answer?  This mystery is the subject of much debate (and mirth)....It is such a peculiar practice, did some RE guru suggest it?
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March 26
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Mary Miller, "MaryM"

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Try this calculator:  http://www.zillow.com/mortgage/calculator/How-much-can-I-afford.htm
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March 26
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Roberto Ribas, "azrob"

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spam nonsense when a smarmy realtor asks a quesiton just to answer it himself...
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March 26
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Roberto Ribas, "azrob"

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why do so many agents say talk to a mortgage broker???

are you guys stupid? or just unable to read???

the question was, how much mortgage payment can you
AFFORD... not how much you can be qualified for... they are different questions...

only YOU can decide how much you can afford.
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March 26
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Jason Frangoulis

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Talk to your Financial Advisor first then talk to your mortgage professional. 
Remeber just because the bank will qualify you for the loan still does not mean you can afford it. 

Good Luck. 
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March 26
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laurie frame, "laurieframe"

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Lenders tend to recommend that a persons house payment should be not more than 30 % of household income.There are some other complicated formulas. Basically take your net and divide it by 33% and that would give you a general idea where to start looking. Also your credit rateing will have an effect on how much home you will be able to get for your money.
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March 30
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NTETS, "Caveat Emptor"

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try to avoid having more than 30% of your monthly income going out the door for debt(incl mort, car and credit). 20-25% is even better.


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March 31
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BMFPitt

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How much you're paying in rent + whatever is going explicitly into a down payment fund per month - 5% for incidental costs associated with owning.  That's how much you can afford.
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March 31
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jkonstant

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This topic makes me sick to my stomach. Always has and always will. Back in 1995 Bank of America told me what I could afford after asking and reviewing a few simple questions. Fortunately I had a great personal relationship with the loan officer and when I let, "You're effing nuts" slip, only my wife was embarrased. You see, not once was I asked how man children we had or what my utilities might actually cost each month. These and other expenses have always been neglected in the qualification process and like Roberto stated above, qualification is far different than what can be afforded. Simple mathematical formulas should never be used in determinng affordability. I was not willing to sacrifice our family vacations, dinners out or any lifestyle related expense for the sake of owning a more expensive home and shame on those who will or the mortgage brokers and realtors who fail to see the whole picture.
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March 31
 

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