My wife and I are in the market for a new house. We currently are paying mortgage for a house at the value of $128,000 at 6.5%. With taxes and insurance we pay basicly $1,133 a month. Our current house is a split level (basicly 4 floors) and poorly setup for our needs, so were looking to hopefully find a home nearby that is a little more us. Our current mortgage has about 10,000 paid off of the mortgage.

So my question comes from, I went on a few of these mortgage calculators and I understand they do a %35 to income ratio to determine how much you can afford. I put in all of our numbers and what we pay for taxes and insurance. But they seem to come back with very low numbers. My wife and I make around 94,000 together a year, and we are doing fine now, If I do the math personally for a house ranging around $165,000, it shows only (been told my the banks that we could very well qualify for close to 5%) less than a 100 dollars more than what we pay now.

So I guess I'm confused, do these calculators really show the truth in what people spend on a house? Were hoping to be able to find a house but it seems that in NY the only thing we'll be able to afford , in the size we want, is a much older house. But then again, the money we would have to put into a older home.. seems like would justify putting more into a mortgage for a newer home.

Maybe I'm missing something though, opinions would be great.

RivaCom, Find a local lender and have them do the numbers for you. Be sure that the numbers include PITI (Principle-Interest-Taxes-Insurance) and also any homeowner dues. Some of the online calculators do not include taxes and Insurance so be sure to add those numbers in as well. That is why I recommend talking to a local lender.

Also right now rates are a bit lower than what you are currently around 5% to 5.5% depending on credit. That may make up some of the difference that you are seeing in the payment.If you end up with an older home that needs repairs you may want to consider an FHA 203K loan that will include money to do repairs to a home after closing.

It's not just the house payment it's the overall debt you have (cars,credit cards,etc.) that make up the ratio based on what you earn together.

The question you need to have is can you sell your current home or if you have to pay out some cash and take a loss are you willing to do it? If not you would need to rent out your current home and then they could apply 75 percent of rental income to debt ratio with at least a 1 year lease in certain situations.

Now if you live in an urban area space comes at a premium. It much easier and costs less to build space up then to have on one level.The foundation is the most expensive part of a build and to have it all on one level will come at a premium because lot size has to be bigger. You might have to move to suburban areas OR find and older home you can renovate that is on one level already on a nice size lot.

So find a great mortgage broker and a real estate broker and good luck!

Riva, these calculators take very little into account. Speak to a lender who can do the calculation based on all the information given, thus being a much more accurate measure of how much you can afford. But ultimately, do not overextend yourself (like so many buyers, getting more than they can afford). Good luck.