How much can you afford in Key West?

The prevailing rule says that a home should cost no more than 2.5 times your annual income. Thus, if your income is $50,000, your price limit would be $50,000 multiplied by 2.5, or $125,000. Typically, a lender expects you to pay no more than 28 percent of your gross income for housing, which includes the loan payment, property tax, home owner's insurance, and estimated utility costs. A lender will look at your debts. As a general rule, your total indebtedness, including monthly housing expenses, should not exceed 36 percent of your gross income.

Along with these guidelines, consider your lifestyle and priorities. If costly vacations, dining out, and entertainment are important to you, you may want to buy a less expensive real estate than the lender says you can afford. Many people, however, find that they are willing to give up some luxuries or even stretch their budget for the home they want.

Use the following worksheet to help calculate how much of a real estate mortgage a lender would be willing to grant you. Remember that your total debts plus potential housing costs cannot exceed 36 percent of your gross income.

Gross Monthly Income

                               Borrower   Co-Borrower  Total

Base income           $______    $________      $_____

Overtime                 $______   $________      $_____

Commissions          $______    $________      $_____ 

Dividends/Interest  $______    $________      $_____ 

Other                       $______   $________      $_____ 

Total                       $______    $________      $_____ 

LIABILITIES:         Monthly    Unpaid           Months left to pay 

Payments  Balance  $______    $________      $_____ 

Automobile loans    $______    $________      $_____ 

Student loans           $______    $________      $_____ 

Personal loans          $______    $________      $_____ 

Credit cards              $______    $________      $_____ 

Other                        $______    $________      $_____ 

Total Monthly

Payments                  $______    $________      $_____ 

How much will a Key West lender provide

The total real estate loan amount a lender will agree to provide is directly tied to your income and expenses. As a Key West homeowner, you will be paying a monthly loan payment, along with the cost of insurance, property taxes, utilities, and maintenance. A lender looks for a solid history of income, employment, and credit. The Key West lender also will review your expenses, including automobile payments, credit-card debt, education loans, child support, alimony, etc. If you are borrowing money for your real estate down payment, the lender will treat the interest payments on that loan as expenses.