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If you are looking to buy a home, how much of a mortgage you qualify for will depend on a number of factors. Lenders use ratios to estimate how much of your income is going towards existing debt and how much you can afford for a home mortgage. They generally take the lower of two ratios, 28% and 36%.
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The 28% ratio is the percentage of your income that goes toward your mortgage principal, interest, property taxes and home insurance. The total of these four components in your monthly payment should not exceed 28% of your monthly income.
The 36% ratio is the percent of your income that goes toward principal, interest, property taxes, insurance and other debt. The total of these five components should not exceed 36% of your total income.
Consider Your Current and Future Lifestyle
After learning what you can qualify for, consider what you can actually afford based on your lifestyle and future plans. For instance, you may qualify for a $1,000 per month mortgage payment based on current interest rates, however, you may not be able to afford your payment if interest rates increase.
This calculator will estimate the maximum value of a house you may qualify to buy based on your current household income and other debts.