How much house is affordable?
Ideally new home buyers should create a budget and calculate their debt service
ratios. However, here is a rule of thumb that some choose to follow:
It works like this: Start with the household's gross annual income (salaries,
wages, and taxable income before taxes). Multiply by 2.5 (assuming a 8.5%
mortgage interest rate). Example: people with an annual income of $60,000 can
reasonably afford a $150,000 home.
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Home Price Guide |
|
On a family
income of: |
Can afford a
house of: |
And the 5% down
payment would be: |
| $50,000 |
$125,000 |
$6,250 |
| $55,000 |
$137,500 |
$6,875 |
| $60,000 |
$150,000 |
$7,500 |
| $65,000 |
$162,500 |
$8,125 |
| $70,000 |
$175,000 |
$8,750 |
| $75,000 |
$187,500 |
$9,375 |
| $80,000 |
$200,000 |
$10,000 |
| $85,000 |
$212,500 |
$10.625 |
| $90,000 |
$225,000 |
$11,250 |
| $95,000 |
$237,500 |
$11,875 |
| $100,000 |
$250,000 |
$12,500 |
Calculate How Much You Can Afford
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