Buying an Affordable Home

• Evaluate your financial situation as the lenders do. Typically, your total monthly housing costs of mortgage principal and interest payments, property taxes and hazard insurance (PITI) should not exceed 28 percent of your gross monthly income. Or, housing costs plus any outstanding monthly long-term debt should not exceed 36 percent of gross monthly income.
• Determine how much your financial institution is willing to lend you. Our Mortgage Calculators and the chart below can help you get a good idea of the capital you'll have to work with, but you should call on your Agent for help during the prequalification process.
• Know how much you can afford in monthly payments. Lenders factor in sales price and down payment, but place more importance on how much you can handle monthly.
• Become a preapproved buyer. Preapproval gives you more buying strength since the lender makes a credit decision and preapproves you for a certain mortgage amount. You'll know what price range your lender will approve -- and you'll be in a position to make an offer as soon as you find the right home.

Your mortgage power may surprise you. This chart shows how much house you can afford at any given interest rate. To use it, simply find the monthly payment you can afford and read across to the nearest current interest rate. The point where the two intersect shows you how much mortgage that monthly payment will buy.

It is important that you obtain a mortgage pre-approval. This is an essential time-saver when you come upon the house you want to buy. Mortgage pre-approval is like securing a loan before you find a house, and it's real peace of mind to know exactly what you can afford.

Payments below are based on a 30-year amortization and include principal and interest only. Ask your GMAC Real Estate associate what to add for taxes and insurance.