How Much House Can You Afford?

Taken From : Bank Vs Budget

Who Decides?

• Your bank or lending institution decides. They will look at your application and based on a predefined set of criteria and decide if you can afford the home. 

What Do They Look for?

• Credit History-The better your credit, the lower your rate. 
• Down Payment-Banks want more money down than they used to so plan for a 10% down payment. Also remember that if you can put at least 20% down, you will avoid private mortgage insurance that costs of approximately $80 per month. Wouldn't you like to have an extra $960 per year? 
• Debt to Income Ratio- The debt to income ratio (DTI) looks at the amount of money you owe on a monthly basis and compares it to the money you make each month. The number is shown as a percentage of your gross income.
• Your Income- If your DTI (debt to income ratio) is 25%, but you only make $10,000 per year, you aren't going to get that home.