Prospective homeowners always need to ask how much mortgage they can afford based on their income. This is an important question because no one wants to take on a mortgage they cannot afford to pay for the next fifteen to thirty years. The most commonly used formula to answer this question is the twenty eight thirty six rule. 

The rule of twenty eight thirty six applies in most instances of borrowing on a home, whether it’s a first, second, or even a third mortgage. A first time home buyer will need to determine how much mortgage he or she can afford based on his or her income and that will determine how much home they can afford to purchase.

Simply put, the total house payment (principal, interest, taxes, and insurance) must be less than twenty eight percent of the buyers’ gross income, and the overall total amount of indebtedness should not exceed thirty six percent of that same income.

There are various forms of home mortgage to consider also. FHA is a federally insured mortgage as is a VA loan for veterans. There are also bank financed loans which are commonly used in many instances to obtain a mortgage that will have a somewhat higher rate of interest (higher than FHA), but are easier to obtain for many who’s credit is less than stellar.

First time homeowners are finding it somewhat easier to get into their first home now since the tax deduction put into effect regarding first time home buyers. Also there is a first time home buyer grant specifically aimed at helping those who are purchasing their first home. This is grant money which does not require repayment.

Using a mortgage calculator can give a pretty good indication of how much mortgage can I afford based on my income and also tell what the monthly payment may be. Calculating your mortgage payment must be done based on annual income or sometimes monthly income for the entire household. In other words, if the husband and wife both work, their combined income will be considered, making it easier to qualify for a new mortgage loan.