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DETERMINING HOW MUCH YOU CAN AFFORD Your financial institution will ask for your gross annual income in order to decide how much to lend you. (This is just one of the factors of the lending formula that a financial institution takes into consideration) Your gross annual income is the income you earn in a year before taxes and other deductions. It can also include other supplemental income such as rental income, self-employment income, alimony, and child support. To get a general idea of your home buying power, use this formula: Multiply your annual gross income by 2.5. Example: $45,000 x 2.5 = 112,500 You
may be able to qualify for a mortgage of $112,500. Although your lender may qualify you to buy at a certain amount, it doesn’t mean that you might be able to afford it. Remember that although your gross income is one amount your net income (earnings after taxes) is a lot lower and this is the amount that you need budget with on a monthly basis. Helpful hint - Set
a budget with your estimated mortgage payment; include property taxes,
maintenance and repairs and any other costs associated with your housing
costs.
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