Whether or not you can live comfortably with the amount of your suggested monthly mortgage payment is a decision best made by you, the buyer.

Housing Expense Ratio
A general rule is that your monthly mortgage payment should be less than or equal to 25% of your gross monthly income. Depending on the type of mortgage you choose, this percentage may change. However, there are mortgage products available that focus specifically on the debt-to-income ratio, and more information on these types of mortgage products can be provided by your lender.

Debt-to-Income
Factors such as your income, debt and credit history directly affect your buying power.  Your debt includes things such as your credit card bills and car loans, and other expenses such as housing expenses, alimony and child support.  Combined, these debt items should not be more than about 30-40% of your gross income.

Some hints to help you determine a mortgage amount that makes it possible for you reasonably to meet your long-term goals and needs:

•  CRUNCH THE NUMBERS:  Compose a budget including your estimated mortgage payment including taxes and insurance.

•  MURPHY’S LAW:  Utility costs should be included in your housing budget with an additional amount set for costs of future home maintenance and repairs.

•  LOOK AT THE BIG PICTURE:  Be sure to take other financial goals into consideration such as paying for college tuition or saving funds for retirement.