Before you start looking for a new home, you should have an idea of how much you can afford to pay monthly. Find out by taking a closer look at your total monthly household income, as well as all of your other debts and regular monthly payments. Also consider how much money you have for the down payment, the loan interest rate, and the length of the loan. You should include costs for taxes, insurance and private mortgage insurance (if needed).
Your estimated front and back ratios are used to compare your housing expenses with your other normal living costs. The "front ratio" is the percentage of your gross income related to your housing costs, including property taxes and insurance. The "back ratio" is the percentage of your gross income needed to cover both housing and all of your routine monthly expenses.
Typically, your front/back ratios should be in the range of 28%-33%/36%-42% and no higher than 35%/45%.
With this information, you can get a general idea of how much home you can afford. For example, with a $47,200.00 down payment and a 30 year mortgage at 4.000%, you could afford a home that cost $472,100.00 if your gross monthly income is $8,000.00 and your total monthly expenses other than your mortgage payment are no more than $910.00.
In this scenario, your monthly housing payment would be $2,580.86, with $2,028.80 going toward your mortgage, $250.00 for taxes, and $125.00 for insurance.