Here’s how you can calculate your maximum monthly mortgage payment.

Do you know how much more you can afford? As a buyer, you need to know what price range you should be looking at, but to figure that out, you need to do a few calculations.

First, find your total monthly credit obligation. This is also known as your debt load. Take your credit cards, car loans, school loans, 401k loans, and any other monthly debt obligation you have and subtract them from your total monthly gross income. 

“Your monthly house payment should not exceed 43% of your monthly gross income.”

Next, multiply your total monthly income by 43%.

Finally, subtract that number and the total monthly credit obligation. You’ll be left with your maximum monthly payment.

Your monthly house payment should not exceed 43% of your monthly gross income, and your credit obligations cannot be greater than that remaining amount. You’ll want to speak to a lender to get more precise numbers, but this calculation should give you a basic idea.

That 43% ratio is not set in stone either. Each situation is unique, and some programs may allow you to have a higher ratio. If you’re thinking about investing in real estate, you should keep that ratio way lower than 43%. You can use whatever remaining chunk you have as leverage to buy properties to increase your income.

If you have any questions about this or other real estate topics, feel free to give me a call. I’d love to help.