Vision Realty

You must talk to a local lender and determine how much house you can afford! Nailing down your budget early will make the overall process more streamlined and less stressful.

How much can you afford:

The 28/36 Rule

The 28/36 rule is an established benchmark used by many lenders to determine how much credit to offer you. Here's how it works:


Get preapproved for a mortgage. Your lender can approve you for a loan amount which you will need to start your home search.  


The "28" refers to the notion that no more than 28 percent of your gross monthly household income should go toward housing costs, which include mortgage principal, interest, taxes and insurance.

To calculate, simply multiply your gross monthly income (amount before taxes) by .28. Use this amount as a guide for how much house you can afford.

Example: You earn an annual salary of $50,000. Divide 50,000 by 12, giving you a monthly gross income of $4,166.67. Multiply that by .28, and you'll find you should spend no more than $1,166 each month on total housing costs.

The "36" part of the 28/36 rule refers to your overall debt, which shouldn't exceed 36 percent of your income. This is very important to consider because debt loads – such as car and credit card payments on a monthly basis– impact the amount you can afford to spend on a house.

If you are a first time home buyer don't forget to figure taxes and insurance in on that monthly payment you just came up with.

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