How much house you can afford?

Your lender decides what you can borrow but you decide what you can afford. Lenders are careful, but they make qualification decisions based on averages and formulas. You have a lifestyle you’re accustomed to and need to realize if you want to maintain it you’ll need to sit down and really crunch the numbers. Make sure to leave a little room for the unexpected from furnishings, to landscaping, to repairs.

Normally banks use a ratio called 28/36 to decide how much borrowers could borrow. A housing payment couldn’t be more than 28 percent of the buyer’s gross monthly income, and his or her total debt load, including car payments, student loans, and credit card payments, couldn’t be more than 36 percent

Deciding how much you can afford should involve some careful attention to how your financial profile will change in the upcoming years. In the long run, your own peace of mind and security will matter most.