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How much home can you afford?

Only you can decide how much you can afford, however, you can use advice or guidelines to help you decide.

Spending and Saving Plan Method one way to figure out what is affordable for you is to start with your spending and saving plan, which some people call a budget. Take your total net monthly income and subtract your total non-housing monthly expenses. How much money is left over? That’s what you can use for mortgage payments and the other costs related to housing.

Monthly Mortgage Payments

A mortgage is a home loan. When you have a mortgage, you will make a payment each month. There are generally four parts to the payment:

A mortgage is a home loan. When you have a mortgage, you will make a payment
each month.
There are generally four parts to the payment:

  • Principal–The amount of money you borrow
  • Interest–Interest you have to pay on the principal
  • Taxes–real estate taxes
  • Insurance–Homeowner’s insurance

Additional Costs of Homeownership
Housing costs do not just include mortgage payments. There are other costs, too.

Debt to Income Ratio

Your debt-to-income ratio shows how much of your monthly gross income—your income before taxes or other deductions are taken out—goes to covering your monthly debt payments, including your anticipated monthly housing payment. This is the formula for a debt-to-income ratio:

A debt-to-income ratio is often written as a percentage. It is generally easier to qualify for a mortgage if you have a low debt-to-income ratio rather than a high debt-to-income ratio.
The higher your debt-to-income ratio, the less money you have to pay for
everything else. That’s because more of your money is going to cover debt
payments.
If your debt-to-income ratio is 40 percent, that means 60 percent of your income is available to cover non-debt expenses. Some lenders prefer a debt-to-income ratio of 36 percent or less. Others may accept a higher ratio.
But debt payments aren’t your only expenses.

Our Online Pre-Qualification Form makes it easy, fast and secure to apply
https://asbt.com/for-you/borrowing/home-loans/

For information on home lending programs, contact Meghan Wenker or Leslie Haas at 701-774-4139. For a FREE “Money Guide to Home Buying” email realestatelending@asbt.com or go to https://www.asbt.com/for-you/borrowing/home-loans/
American State Bank & Trust Co. NMLS# 407966