A big consideration when buying a home, naturally, is how much you can afford. This is generally calculated based on a percentage of your monthly income, your mortgage payment, and other debt.\r\n

Mortgage Payment

\r\nGenerally, lenders don’t want borrowers to spend more than 28 percent of their gross, pre-tax income on their core mortgage payment, which is the principal and interest on your loan. For example, if your gross income is $5,000 a month, your mortgage payment should not exceed $1,400 a month.\r\n

Total Housing Costs

\r\nMortgage payments don’t just involve the principal and interest on the loan. You also have to pay monthly costs for your homeowners insurance, property taxes and any mortgage insurance you might have to pay. Lenders typically don’t want your total monthly housing costs to exceed 32 percent of your gross monthly income. So using the example of someone with $5,000 in monthly income, total housing costs would be capped at $1,600 a month.\r\n

Total Debt

\r\nLenders also consider other debt payments for which borrowers are responsible. This includes auto loans, student loans and minimum credit card payments. Lenders typically don’t want this amount to exceed 40 percent of gross income. So someone with $5,000 a month in gross income would have his total debt payments capped at $2,000 a month.\r\n

Other Factors

\r\nWhile lenders use specific criteria to determine how much house you can afford, you have to consider other expenses. If you pay daycare costs for your children or have high commuting costs because you travel far for work, for example, you might not want to max out your mortgage costs. Don’t forget about your down payment and closing costs, too.\r\n\r\nOnce you have figured out what you can afford, a good option for your housing needs is the energy-efficient homes that Provident Homes Corp. builds in the neighboring communities of West Chester, PA.