When weighing the decision to make an offer on a new home, you may want to consider using a helpful ratio to evaluate how much home you can afford. The Housing to Income Ratio is a common way to evaluate housing expense based on your household income.
This ratio compares the sum of monthly housing expenses to monthly gross income. The mortgage industry’s conservative guideline is that housing expenses should be 28% or less of income. Monthly housing expenses include payments such as principal, interest, property taxes, hazard insurance, private mortgage insurance, and condo or homeowner’s fees.
If other factors are thought to compensate for the higher risks, lenders may use a housing-to-income ratio above 28%. Also, if you make a large down payment, a lender might use higher ratios.
For more information on home loans or to get a mortgage pre-approval, contact your nearest Arvest Bank location.
Source - Arvest Home Digest