How Much Highlands Ranch Home Can You Afford?

To determine how much of a home you can afford, you need to calculate your expected monthly payment. Most of your payment will go toward loan principal and interest, also called P+I. However, your monthly payment is also likely to include amounts for property taxes and homeowner's insurance. Because of these extra payments, your monthly P+I payment is sometimes called your P+I+T+I payment. If you plan to make a down payment of less than 20% of the home purchase price, you will also have to add an additional amount for private mortgage insurance ( PMI). Lenders require PMI to insure against the higher risk of default that occurs with loan-to-value (LTV) ratios greater than 80%. ( An LTV of 80% is equal to a down payment of 20%.)

Your housing ratio is your total monthly payment divided by your monthly gross income. Generally, the ratio should not be more than 28%. For example, if your monthly P+I+T+I payment is $1,400, your monthly gross income should be at least $5,000.

Read the entire article.