How much home can I buy? Here’s a simple formula I learned some 36 year ago for figuring out what someone may afford when buying their new home.
Take your Gross Income, multiply it times 40%, divide by 12, and that will be your monthly payment you would qualify for from the bank. (This is if you have good credit and is only a ball park estimate.) The interest rate factor for 5% is $5.37. I know there is cheaper money out there but this will give you a good general idea. If you want to know another interest rate factor go to the internet and type in the words “amortization table”, look at what the figure is for $1,000 under the interest rate you want a factor for and use that number as your interest rate factor. How much home can I buy?
What is the formula for knowing the price of the home I can buy?
Here’s an example: Your Gross Income is $50,000: multiple by 40% = $20,000 divide by 12 = $1,666.66/month divide by interest rate factor $5.37 for 5% = $310,366.21. Now add your down payment to that number and you will know what you can buy using a loan from a Conservative lender. Again this is a ballpark method and only gives you an educated idea of what you might be able to buy. Remember this does NOT include any closing costs you may incur during your escrow period.
If you would like to know more information or better understand the home buying process. I would be happy to talk with you and answer any of your questions. In the meantime here are a few reports that may help you on your journey of buying a new home. http://www.sfbay-homes.com/buying/index.cfm?page_ID=48169
What is the formula for knowing the price of the home I can buy? For further help email, or call me. I am here to help you. How much home can I buy?