Questions about what you can afford?
Generally, when a financial institution reviews a mortgage application, two basic guidelines are used to determine how large a mortgage to grant: 1) Principal, Interest, Taxes and Insurance (PITI) should not exceed 25-28% of gross income and 2) PITI plus other long-term debt should not exceed 33-36% of gross income. Refer to the mortgage calculator linked below to determine principal and interest. Long term debt includes car loans, installment loans, alimony, child support, and balances on charge cards that will take more than 10 months to pay off. The size of the down-payment you make will determine the mortgage amount that will be granted.
- Property taxes and special assessments
- Home/hazard insurance
- Property maintenance
- Association and membership fees (if applicable, for condominiums, townhouses and some developments). Some of the above listed fees will be included as part of your monthly mortgage payment, while others are not. Be sure to ask about how these fees are to be paid.