Home Affordability Worksheet^*

This worksheet will take you step-by-step through some calculations that will help you determine just how much of a mortgage you can afford. Remember that this worksheet is only a guide, and you will want to work closely with your mortgage consultant.

Step 1:
Enter your gross monthly income (before taxes and other deductions such as retirement plans, and insurance plans) on Line A.

A ___________________

Step 2:
Multiply Line A by 28% and enter the total on Line B.

A X .28 =

B ___________________

The total represents the approximate amount you can afford to spend on monthly housing expenses. Keep in mind that this total should include your house payment (principal and interest) plus insurance and taxes.

Step 3:
Multiply Line B by 80% and enter the total on Line C.

B X .80 =

C ___________________

The total represents the amount you can afford for a monthly principal and interest payment.

Step 4:

To estimate the total mortgage amount you could qualify for and stay within the budget established on Line C, choose the interest rate from the Mortgage Payment calculator that is closest to the average interest rate being offered in your area.

Enter the corresponding factor number on Line D.

D ____________________

Then Divide Line C by Line D and enter the total on Line E.

C/ D =

E _____________________

Multiply Line E by 1,000 and enter the result on Line F.

E X 1,000 =

F _____________________

Step 5:

Now, let’s figure in your down payment. If you want to make a 5 % down payment, divide Line F by 95%; 10% down payment, divide Line F by 90%; 20% down payment, divide Line F by 80%. Enter the total on Line G.

F _____________________

Divided by .95 or .90 or .80 =

G _____________________

Line G is how the total amount of purchase you can afford.

Step 6:

Now, let’s look at your total debt ratio. Go back to Line A. Multiply Line A by 36%. Enter the total on Line H.

A X .36 =

H _____________________

Now add up your monthly obligations, such as credit cards, auto payments, etc. Enter the total on Line I.

I _____________________

Add Line I to Line C and enter the amount on Line J.

I +C =

J _____________________

If Line J is greater than Line H, your monthly obligations may exceed the amount you could qualify for.