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Here's how to determine how much house you can afford

Somewhere between those thoughts of "think big" and "be conservative" is the perfect amount of home your pockets can handle. 

The final answer in your home purchase price tag is a blend of hard line numbers and personality, location and age. But to get in the ballpark, banking, realty and government experts recommend answering these five questions:

Does it make sense to buy instead of renting?

You may not need to consider buying a house at all when your money is better spent renting, according to Fannie Mae, the leading provider of mortgage financing in the U.S. By Fannie Mae standards, buying only makes sense if you plan to stay in one location, want to build equity over the long term, want the potential tax advantages and can afford the maintenance costs of owning. 

What should my annual income be if I want to own a home?

Home buyers seeking a mortgage have been well-served by the traditional "28/36" rule, according to Interest.com. In brief, the monthly total of mortgage payments, insurance, property taxes and condo or homeowners' association fees shouldn't exceed 28 percent of your monthly gross income. Here's how that would look for a few sample incomes:

Annual income/Monthly housing limit

$50,000/$1,166

$60,000/$1,400

$75,000/$1,750

$100,000/$2,333

How much debt do I already have?

Monthly payments for credit card bills, student loans and all other debt, including this impending house purchase, shouldn't exceed 36 percent of your gross income, according to Interest.com.

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How affordable is my location?

"Location matters," NerdWallet noted. "Affordability varies based on your state (interest rates) and even your county (property taxes)."

How much down payment do you have?

The more you have for a down payment, the more house you can afford and still stay within the debt and income limits. If you can make a down payment of at least 20 percent, you'll also be able to buy more home because you won't have to pay mortgage insurance, which costs anywhere from 0.20 percent to 1.50 percent of the balance on your loan each year, based on your credit score, down payment and loan term.

If you're like most buyers, your down payment will come from what you've saved and any equity you've built up if you currently own a home. Equity is based on the current market value of the home you already own after you've subtracted any money you still owe on the mortgage.

Don't despair if you can't quite come up with the traditional 20 percent, Jim Merrill, founder of Axel Mortgage Inc. in Phoenix, told Interest.com. He said borrowers can qualify for conventional mortgages with down payments of 3 percent and credit scores as low as 640 in some situations. Other down payment options include lender-paid or discounted mortgage insurance, including programs from Fannie Mae. A good mortgage broker can run you through the possibilities.

Once you've answered the question, in general, proceed to using one of the many worthy affordability calculators on the web, like this one from Zillow.

If you run the numbers and still want a home that's a little outside of what the calculator says you can afford, you may be able to afford down payment assistance, which normally takes the form of a second or third mortgage or grant that provides benefits like zero percent interest and deferred payments, according to Zillow. Usually municipal or quasi-government agents or non-profits offer down payment assistance programs. To find one in your area, ask your real estate agent or search the Down Payment Resource Center.

When you have already bought more home than you can afford

For people who have purchased a home and now realize they've got too much debt to handle comfortably, Fannie Mae recommended immediate steps to take. "Even if you haven't yet missed a mortgage payment, but are worried you might fall behind soon, now's the time to take action," the lender said. "You may qualify for a temporary (or permanent) solution to help you get your finances back on track and avoid foreclosure."

You may be able to employ one of these strategies, according to Fannie Mae:

Refinance: This involves a new loan, new terms, interest rates and monthly payments and would entirely replace the current mortgage you're having trouble with. 

Repayment plan: With this option, you or an agent acting on your behalf would forge an agreement between you and your mortgage company that lets you pay the past due amount, added on to your current mortgage payment, over a specified time period until your mortgage is current.

Forbearance: This involves an offer from your mortgage company that lets you temporarily suspend or reduce your monthly mortgage payments for a specified period of time.

Modification: In this case, you and the mortgage company agree to change the original terms of your mortgage to something more workable. It may involve changes to your payment amount, the length of your loan or the amount of your interest.

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