How Much Can You Afford to Pay For a House?

Many wannabe house purchasers wonder whether or not they can afford the price quoted on the house they would like to buy. Or if they have not started their house shopping, they may be wondering what price range they should be exploring.

If you intend to buy with all cash, you can pretty much answer the affordability question on your own. But if you will need a mortgage, as most home buyers do, the decision is no longer yours alone. A lender is also involved, and behind the lender are multiple government agencies that set rules that the lenders are obliged to follow. These rules define the minimum documentable income and cash borrowers must have, and the maximum debt payments they are allowed to have. In addition, when the purchaser's down payment is less than 20% of the price, mortgage insurance is required at premiums set by private insurers or by FHA.


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