How do I know if I can afford a mortgage?
Like a new sweater, it’s important that your mortgage fits you comfortably. It’s perfectly fine to want the best home you can afford, but it’s important that your mortgage payments fit well within your budget.
Although some mortgage lenders will stretch your qualification ratios (your total mortgage payment in relation to your total income), it may leave you with very little expendable cash to meet unforeseen expenses.
A good rule of thumb is to follow traditional wisdom, which advises that the total of your mortgage payments PLUS your monthly debt payments (loans, credit cards, etc.) shouldn’t be higher than 37% of your net income.