Borrowing Power - How Do I Know How Much I Can Afford?

It actually isn't that hard to figure out your borrowingthe bank has figured that into the other 60% of your
power. All you have to do is add up all of yourgross income.
expenses and compare it to your income. Once youI don't recommend using the banks formula to figure
do that you can use an interest calculator to figure outout what you can afford because it is kind of
how much of a home you can get based on thatcomplicated. You should add up your own bills and net
monthly amount you can afford. That is called yourincome to weigh against each other. You can probably
borrowing power. If interest rates go up then it canlook at your bills and quickly assess what you can
highly affect your buying power because it will add toafford for spending money each month so that's
your monthly payment.where you should start.
The bank has a harder time trying to figure out howThen you can get your borrowing power by using a
much to approve you for because they don't havemortgage calculator. Plug in the current interest rate
records of everything you have for bills and expenses.and the loan amount you wish to get approved for
So they have a debt to income ratio they use toand see what you get for a monthly mortgage
determin when you have reached your limit. The bankpayment. If you can afford it with the taxes and
allows you about 40% of your gross monthly incomeinsurance adding in then the bank will most likely
per month to use. So take the 40% of your monthlyapprove you. If you don't think you can afford it and
income and subtract your car loan, college loan,the bank approves you anyways I highly recommend
mortgage payment and any other bills. The only thingnot going through with it. Just because the bank
you don't have to include is your house bills becauseapproves you doesn't mean you can afford it.