Chapter 4:
How Much Home Can You Afford?

For most people - who pay top dollar, retail pricing for their homes - the question "how much home can they afford?" really means, "how big a mortgage can they afford?"

But for Bargain Network members - who have toll-free live support in finding the best possible real estate deals - the question becomes: "How much more home can I get for my dollar?" In other words, by using Bargain Network to help find an undervalued property, your monthly mortgage payment can go a lot further than someone who pays full market value for their home.

But what kind of monthly payment can you afford...even when you find a terrific deal? It's an important question, and Bargain Network makes it easy to find the answer. We've included two simple steps in this chapter to find the monthly mortgage payment you can afford.

STEP ONE: The Monthly Mortgage Payment Chart, is used by the FHA (Federal Housing Administration) to determine what size monthly mortgage payment you qualify for. According to the FHA, most people can readily afford to put 29% of their gross monthly income toward housing costs. People with very little debt can afford even more...up to 40%!

Simply find your income on the chart above, and write down the figures in the last two columns. (The first figure shows what you can afford if you put 29% of your monthly income towards your mortgage payment; the second figure shows what you can afford if you put 40% towards it). If you have a lot of debt payments each month - on things like multiple credit cards, car payments, student loans, etc. - use the 29% figure. If you have normal household bills each month, but don't have significant debt, use the 40% figure.

STEP TWO: Use the Mortgage Size Calculator Chart to determine how large your mortgage can be. To find this amount, you need to know approximately what your mortgage interest rate will be. Because interest rates change frequently, this chart shows a wide range of interest rates. Simply look down the column that has today's mortgage interest rate (call Bargain Network member support for current rates) and find a dollar amount that is close to the monthly payment figure you wrote down from Chart A. Then, look all the way over to the left hand column of Chart B, and you'll see the size of the total mortgage you can likely afford.

Please note that the figures on this chart are for monthly principal and interest payments only. Your total mortgage payment may also include taxes and insurance, which vary from place to place. So we suggest you look for a total monthly payment that is slightly less than the amount on this chart...to allow for the taxes and insurance you will owe every month.