How to Calculate What Mortgage I Can Afford

Sticking to a budget keeps home hunting under control.
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Whether you rely on instinct or logic in your home search, understanding how much home you can afford makes home hunting more manageable. Watch all the home-hunting shows you like on television, but do not step out your door to look for one of your own until you calculate how much you can afford, and how much you feel comfortable paying for a home.

Step 1

Locate and collect your last year's tax return, current W-2 work stubs and any 1099 income-earned statements and put them in one pile on a large work table.

Step 2

Add together all your gross monthly income and write it down on a pad of paper under the heading, "income." Tally up your partner's income and make sure to add it to the total if you want the mortgage in both of your names.

Step 3

Write down all monthly debts that your currently pay. Include any alimony payments or child-support payments. List car payments you make every month. If you have another property, write down the payments you make. Leave out any rent that you pay for your current residence. Add up credit card payments you make. Total the amount and write it down under the header, "debts."

Step 4

Subtract your monthly debt total from your monthly gross income total. Divide the resulting number by 3. You can afford housing payments from a mortgage equal to that amount.

Step 5

Search online lender or real estate websites for affordability calculators. Some include factors such as down payment, loan length and interest rates to approximate what home price your mortgage payment buys.

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