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How much can I afford to spend on a house?

Unless you are paying cash, the amount you can afford will depend on your income, assets, expenses, debts, the current mortgage interest rates, and the cash needed for a down payment. However, the rule of thumb used by lenders is that you can afford a home which costs no more than two and one-half times your annual income. For example, if you earn $50,000 per year, lenders assume that you can afford a home which costs no more than $125,000.

Perhaps the easiest way to find out how much you can afford is to visit with your local lender and ask the loan officer to pre-qualify you. Lenders are generally very willing to do so, with no obligation to you. The process is relatively painless. The lender will ask you a few simple questions about your income, assets and debts, and then apply some debt-to-income ratios that have proven successful over the years. Then they will provide you with the maximum amount of a mortgage loan that you can afford.

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This content is for information only and may be incomplete. It is not intended to be legal or tax advice.
You are encouraged to consult with your own attorney, accountant or other advisor.


Arthur Miller Legal Help Videos


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