To calculate ‘how much house can I afford,’ a good rule of thumb is using the 28%/36% rule, which states that you shouldn’t spend more than 28% of your gross monthly income on home-related costs and 36% on total debts, including your mortgage, credit cards and other loans like auto and student loans.

If you want to do the monthly mortgage payment calculation by hand, you’ll need the monthly interest rate - just divide the annual interest rate by 12 (the number of months in a year). For example, if the annual interest rate is 4%, the monthly interest rate would be 0.33% (0.04/12 = 0.0033).

A mortgage is an agreement between you and a lender that gives the lender the right to take your property if you fail to repay the money you’ve borrowed plus interest. Mortgage loans are used to buy a home or to borrow money against the value of a home you already own.

To qualify for a reverse mortgage loan you must own a home, be at least 62 years old and have enough equity built up in your home. The loan works by the lender making payments to the borrower based upon a percentage of the equity that has been built up in the home over time.

• Get your free credit score. Know where you stand before reaching out to a lender. …

• Check your credit history. …

• Calculate your debt-to-income ratio. …

• Gather income, financial account and personal information. …

• Contact more than one lender.

One of the best reasons to refinance is to lower the interest rate on your existing loan. Historically, the rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%. However, many lenders say 1% savings is enough of an incentive to refinance.

Mortgage insurance lowers the risk to the lender of making a loan to you, so you can qualify for a loan that you might not otherwise be able to get. Typically, borrowers making a down payment of less than 20 percent of the purchase price of the home will need to pay for mortgage insurance.

Why it’s smart to follow the 28/36% rule. Most financial advisers agree that people should spend no more than 28 percent of their gross monthly income on housing expenses and no more than 36 percent on total debt - that includes housing as well as things like student loans, car expenses and credit card payments.

Fixed-rate loans are ideal for buyers who plan to stay put for many years. A 30-year fixed loan might give you wiggle room to meet other financial needs. … Adjustable-rate mortgages are riskier than fixed-rate ones but can make sense if you plan to sell the house or refinance the mortgage in the near term.