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How much home can I afford on my salary?

General Formulas

A mortgage calculator will give you a general idea of what your monthly payment will be.
A mortgage calculator will give you a general idea of what your monthly payment will be.
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There are a couple of general formulas for figuring out what you can afford. Lenders and other financial experts used to suggest that buyers spend no more than three-and-a-half times their annual salary on the price of a house, resulting in monthly payments between 28 and 33 percent of gross monthly income (before taxes).

As a result of the housing and job crisis, experts are becoming more conservative with their recommendations. If you can't pay for your home in-full, conservative financial experts recommend a 15-year mortgage with a resulting monthly payment no larger than 25 percent of your take-home pay. The broader consensus is that you should be able to make a 20 percent down payment on your home, and plan to spend 28 percent or less of your gross income on your monthly payment, including taxes and interest.

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