If you are looking to buy your first home, one of the first questions you need to ask yourself is how much house can I afford to buy? It's easy to get carried away looking at your dream house, but first, you need to take a look at your finances. You need to consider if you can keep up with your mortgage repayments, even if your circumstances change. Before you take the next step in your home-owner journey, consider the following points.


1. Front End Debt To Income Ratio

The best place to start is your gross monthly income. Gross monthly income is your earnings before tax and deductions. The front end debt to income ratio is the percentage of your gross monthly income you would be paying towards your housing costs (mortgage payment, insurance, etc.). Lenders use this ratio as one method of assessing buyer affordability. An FHA loan requires a front-end DTI ratio of 31 percent, while a conventional mortgage requires a front-end DTI ratio of 28 percent.

afford to buy

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