John Elwell
CENTURY 21 Bill Nye Realty, Inc.
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"How much home can I afford?" is a question most home buyers ask.
While there are varying thoughts on this, a common rule of thumb is that your monthly housing expenses should not total to more than 33% of your gross (i.e. before taxes) income. That includes your mortgage payment, property taxes, and home owners insurance. So take a third of your current income and use that as the maximum amount that you'll be able to afford. Sometimes these limits can be stretched, and your lending institution can give you more information.
"How much will my monthy payment be if I buy that house?" is the next frequently asked question by a prospective home buyer.
For the answer to that we'll need to use a calculator... or, more appropriately, the mortgage calculator that I have provided below. Enter the dollar amount you think you will be financing (remember that you will probably be making a down payment so subtract that from the sales price), the intended length of the mortgage, the current interest rate (you can change the percentage that is already there to reflect current interest rates), and (optionally) your property taxes and insurance costs. Often the tax and insurance costs will be escrowed. When this happens you will pay 1/12 of the yearly cost of each of these items with your monthly mortgage payments, and the lender will hold this money in a special account. When the tax and insurance bills come due the lender will pay them. A little less painful that way for some of us.
Once you've entered the necessary information in the boxes below click on the button and the computer will estimate your monthly payments for you. Do keep in mind that this is just an estimate. Your lender can provide you with exact figures. Even then, keep in mind that if you get an Adjustable Rate Mortgage your mortgage payments can change at specified periods according to your loan's terms. Also, if your taxes and insurance premiums are included in your payments, these will almost certainly change from year-to-year, and thus cause your monthly costs to change as well.
All of the amounts in the boxes can be changed so that they better reflect your particular circumstances.
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