Generally speaking, a DTI (debt-to-income ratio) of 50% would get you a loan. So, that means you can afford a monthly payment of $2416.67 and that would have to include any other revolving/installment bills you might have. (That number would also have to include property taxes and hazard insurance.)
For a loan amount of $300,000 you’d be looking at P&I of $1896.20/month. Based on a purchase price of $375,000 you’d be looking at Taxes/Insurance of $500/month. That puts you at $2396.20 or a DTI of 49.6%. Close enough.
If you went Interest Only, you could bump up the loan amount by $35K and the purchase price to $418,750. The Interest Only payment would be $1814.58. Taxes & Insurance would be $558.33. Total, $2372.91 or 49.1% DTI. Again, close enough to give you the info that you need.
This is based on CA property taxes and no special assessments. You’re mileage may vary. Some settling of contents may have occurred during shipping and handling.
Standard figure would be 30% of your income. For example: Your monthly gross income is 3000.00 then you could afford a payment of $900.00. So, how much house you can afford would depend on how much you put down, how much the interest rate is, etc.
The best rule of thumb to follow if you don’t want to get yourself into financial problems down the road is 1.5 times your gross annual salary equals the amount financed. In your case you would not want to finance more than $87,000. This will leave you enough to pay for your utilities, groceries, gasoline, auto & homeowner’s insurance, plus whatever other debt you may have.
So many people are being over financed, and are ending up in foreclosure because someone has told them they can afford more of a house than they really can. There are many loan calculators out there, but again if you follow their formulas you are likely to end up in trouble. If half of your monthly income is going toward your house payment you will have a very bumpy ride.
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