How do I determine how much mortgage I can afford?

All the online mortgage calculators seem to expect me to enter the interest rate, but, the interest rate is something I won’t know until I apply for the loan - and, I don’t want to apply for the loan if I can’t afford it!

I know my FICO score… are there any good sites to get quotes based on FICO, but without actually getting a quote that might ding my credit with an inquiry?

There’s no hard and fast rule how much you can afford. However, generally, what banks say you can afford is often much larger than what you can afford comfortably (or at least it was this way before the credit crunch).

Just remember your monthly mortgage payment is likely going to be much bigger than your actual monthly principal + interest.

You have:

  • monthly tax escrow
  • HOA dues (if applicable)
  • PMI (a buttrape if your down payment is <20%)

When all was added up, my monthly payment was about $400 higher than what I actually paid on the principal + interest. (It was my first home purchase, and I wasn’t very smart about HOA and PMI.)

Plus, utilities seem to go up on a non-linear scale. My 750 sqft place cost $80 to heat, his 1400 sqft place cost $300. Presumably because volume is also non-linear?

Here are some good calculators: http://www.mtgprofessor.com/calculatorsOriginalMenu.htm

Sorry. I wasn’t paying attention. FICO is only one piece of the puzzle. If you call a lender and tell them your FICO and other vital info, they can prequalify you for a loan. That will only be a rough estimate because rates change all the time anyway. But you could do that.

Other than that, the calculators I linked to, like this one http://www.mtgprofessor.com/mpcalculators/AffordabilityCalculator/Affordability2e.asp lets you change things around. You could run a few different calculations and see what the range looks like.

Finally, the effect on your credit score from an inquiry would be minor: http://www.myfico.com/CreditEducation/CreditInquiries.aspx

Before all the mortgage mess, I heard the rule of thumb was that you could shop for a house up to three times your gross income. That’s assuming you don’t have any other significant debts (e.g. credit card balances, car payments, etc.).

http://www.bankrate.com/brm/news/mtg/20020228a.asp

A better rule of thumb. There are a few rules of thumb using gross income, but they’re very imprecise: http://www.mymoneyblog.com/archives/2007/01/4-different-rules-of-thumb-for-how-much-house-you-can-afford.html (noting that the various gross income rules of thumb gave a range of $50-250K).

My rule of thumb has always been to take what the realtor® says you can afford, and multiply it by 0.75. You probably won’t have as nice a house as a lot of people, but you’ll end up ahead of them in the end, and without government bailouts.

One of the older/basic guidelines was that you can spend up to 38% of your gross income (or combined gross income) on your bills, which include:

mortgage/taxes/insurance
car payment
other installment loans
credit card debt

Misc utilities are not factored in.

Say you make 100k/year.

You can have 24k in mortgage/taxes/insurance and another 14k in other bills, or 28+10, etc.

Let me clarify. I don’t have any issue trying to figure out how much I can pay per month. The question is, how do I found out what a common interest rate for my FICO is? The calculators linked to (like those mentioned in my OP) require you to enter the interest rate, which is one of the major “I have no idea” areas, and even a percentage point or two difference is a huge amount of difference

http://www.myfico.com/myfico/creditcentral/LoanRates.asp

And see, http://www.ehow.com/how_2002324_FICO-mortgage.html

and

http://www.nj.gov/dobi/division_consumers/finance/ficorate.pdf

Ah, perfect! Thanks!