Determine the Right Budget for Your New Home

Mortgage and credit concept. Adult couple planning their future

Know how much money you have coming in and how much money you have going out.

• Get pay stubs, W2s or tax return to determine what you income is. Make sure you include overtime, bonuses or commissions. Project you income for an entire year, then divide by 12 to get your “monthly gross income”.

Know what your monthly debt payments are

• Get info or statements together on car payments, student loans, credit card payments or even child support payments. (Don’t include your current house payment or monthly bill payments like day care, cell phones, utilities etc.) Add all those monthly payments together to get your total monthly debt payments.
• Multiply your gross monthly income x 45% which equals the maximum amount of all payments.
• Take that maximum amount and subtract your monthly debt payments. The amount you have left would be the maximum amount you have available for your new home payment.

Here is a handy calculator you can use to plug your payment in and determine how much house you can afford.