There are absolutes and rules of thumb.
Rule of thumb is you can afford a mortgage of between 2-3x your annual salary which is $600k to $900k for you.
In reality you would be wise (it used to be a banks underwriting rule) to not spend more than 28% of your gross income on your housing payment. That would be $7000 per month and should inclue principal, intereste, taxes and insurance (PITI) and PMI (personal mortgage insurance) if necessary.
At 7% interest (assumption, jumbo loan, good credit), and assuming ~1.5% of the value of the house for real estate taxes (could be high or could be very, very low depending on where it is) and assuming ~$1000/yr for insurance (could be low, could be high, depends on where it is), then your payment of $7000 would cover a mortgage balance of approximately $850,000 (which certainly falls within the rule of thumb). Now, assuming you have 20% down, you could be looking at a $1,000,000+ house.
I have seen Thomas2Sell, Realtor's equation before (in his other answers) and do not understand it. I understand the 30% of gross income going to housing, which is very similar to the 28% limit, so I understand the thought is that you can afford 90,000 per YEAR on housing, but I don't understand why you multiply the result by 12 to get the house price.
In most areas that is going to be way too much house for most people and that guideline is a MAXIMUM you would be able to afford.
Good luck!
2007-10-04 07:45:16
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answer #1
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answered by Rush is a band 7
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Here's the deal - forget about that for a minute. Figure out what monthly payment you're comfortable with based on your lifestlye. If you like to vacation and dine out a lot, you'll want a less expensive house than someone who would prefer to be house poor.
I personally could qualify for 2 to 3 times the house I'm actually looking at. I don't *NEED* the great big mansion, I just need a place to sleep. I'd much prefer to eat at nice restaurants and take vacations every year. That's my decision.
Once you decide how much each month you want to pay for mortgage, go to bankrate.com and they have a conversion calculator that'll tell you what price range you're looking at.
2007-10-04 07:06:27
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answer #2
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answered by Roland'sMommy 6
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The answer below is from a realtor. I am a loan consultant. The correct answer is to add up all of your monthly debt.
Car notes, credit cards (minimum due payments) Loans ect. When you have a total you will divide your debt payment by your monthly income. That will give you your debt ratio. It is always better to get a pre-approval before you start to look for a home to make sure that the numbers work for you and also for the lender.
2007-10-04 05:23:28
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answer #3
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answered by Anonymous
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The rule of thumb is that you can afford to spend 30% of your yearly income on housing. The formula is
Annual Income X 30% = Answer X 12 = Your budget
so............
$300,000 X .30 = 90,000 X 12 = $1,080,000
2007-10-04 04:58:29
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answer #4
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answered by young2bballin 2
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rall depends on all your other debts its called debt to income ratio and is used to determine how high your monthly house payment can be speak to a loan office or broker in your area to find out exact amount
2007-10-04 05:12:02
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answer #5
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answered by Anonymous
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this is extremely high priced - an American could have a extensive chock (yet that is going for all costs in Norway - and Denmark to). the homes are slightly greater low priced in Sweden, yet nonetheless high priced, whilst in comparison with the U. S. costs.
2016-12-17 17:00:30
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answer #6
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answered by ? 4
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