A. Gross Annual Income
B. Gross Monthly Income
$42,000 divided by 12
C. Monthly Allowable Housing Expense and Long-Term Debt
$3,500 multiplied by 36%* (.36). This portion of gross monthly income is usually allocated for principal, interest, taxes, insurance, and monthly long-term debt.
D. Monthly Allowable Housing Expense
1. Multiply line B by 28%*(.28) and enter here.
2. Subtract your monthly long-term obligations ($400 in the example above) from the amount on line C.
3. Enter the lesser of the two amounts here. This is your Monthly Allowable Housing Expense.
E. Principal and Interest Monthly Payment
Multiply the amount on line D (#3) by 80% (.80). Eighty percent is the amount of the monthly allowable housing expense usually allocated to principal and interest payment only, excluding taxes and insurance.
F. Mortgage Amount
Using your Principal and Interest payment, line E, refer to the table on the back at an appropriate interest rate to determine your mortgage amount. In this example we rounded $688 to the nearest payment-$700. Using an interest rate of 9%, the total mortgage amount is $86,997. See highlighted example on the table
G. Planning Down Payment
H. Purchase Price
Add the amount of your planned down payment to line F; this is the price you can pay to purchase your new home.
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