Step 1: How much home can you afford?

The first step in buying a home is to take a look at your budget which we have already discussed. We are going to base the amount that you can afford to borrow upon the LOWER of two calculations.

For illustration purposes, we will use an annual salary of $40,000 and see how much house you can buy for that. We will also use a consumer debt amount of $400.00 and an assumed interest rate of 6.25%.

You will see the term PITI used quite often in these calculations. It means Principal, Interest, Taxes and Insurance, which equals your total housing costs.

We will now proceed with the two calculations.

We are taking the lower of the two which is $800.00 per month.

According to the Home Qualifier Calculator, a payment of $800.00 per month will qualify you for a loan of $109,134.

The first step in buying a house is determining your budget. This calculator steps you through the process of finding out how much you can borrow. Fill in the entry fields and click on the "View Report" button to see a complete amortization schedule of your mortgage payments. Please study the illustration and it's definitions then apply this concept to your own situation.