Home Sales Price Affordability

Working backward, now that you know how much of a mortgage payment you qualify to pay, you can figure out how that relates to a sales price. You will hear experts say to pay anywhere from two to six times your annual salary, but it is smarter to look at the amount of mortgage you can get for that monthly payment.

Your mortgage amount will depend on interest rates. Interest rates fluctuate daily, sometimes hourly. For example, say you want to pay $1,000 per month PI. At 6% interest, on a 30-year fixed-rate mortgage, you can borrow $170,000, payable $1,019 per month.

At 7% interest, you can borrow only $150,000, payable at $998 per month. In this example, you lose $20,000 of borrowing power when the rate jumps from 6% to 7%

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