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Mortgage Basics  Chapter 1: Should you buy or rent?
Hundreds of thousands of Americans ask themselves that each year. There's no easy answer.
 
   
Should you buy or rent?

How much house can you afford?
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Example
The following chart shows your maximum monthly payment and maximum allowable debt load based on your gross annual income (remember, gross income is pre-tax income):

Debt-to-income ratio examples
Gross income 28% of monthly 36% of monthly
$20,000 $467 $600
$30,000 $700 $900
$40,000 $933 $1,200
$50,000 $1,167 $1,500
$60,000 $1,400 $1,800
$80,000 $1,867 $2,400
$100,000 $2,333 $3,000
$150,000 $3,500 $4,500

Here's a look at typical debt ratio requirements by loan type:

Taxes and Insurance
In addition, lenders include the cost of taxes and insurance when calculating how much house you can afford:

Calculator
Armed with the above information, check out the Bankrate.com calculator, How much house can you afford?

-- Posted: May 1, 2006
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Mortgages
Compare today's rates
NATIONAL OVERNIGHT AVERAGES
30 yr fixed mtg 4.01%
15 yr fixed mtg 3.12%
5/1 ARM 3.11%
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