Before you start shopping for real estate, you have to determine how much you can afford to pay each month.

Fortunately, there’s a pretty simple formula that many mortgage lenders use. It’s called the FHA formula. The FHA has found that most people can afford to budget 29 percent of their gross monthly income to housing expenses, depending on total debt. Buyers with no debt can budget as much as 41 percent of monthly income to housing.

To find out how much 29 percent of your monthly income is, use the chart below.  Find your annual income, or a figure close to it, in the column at the left. Then read across to find out how much your monthly gross income is, and finally,what 29 percent of that figure amounts to. This is approximately how much you can spend on total housing costs each month.

Annual Gross Income	Monthly Gross Income	29% of Gross Income
$15,000	$1,250	$363
20,000	1,667	483
25,000	2,083	604
30,000	2,500	725
35,000	2,917	846
40,000	3,333	967
45,000	3,750	1,088
50,000	4,167	1,208

 

 

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