There are many online mortgage calculators that can help you to find out how much house you can afford. There are many aspects that need to be considered if you want to buy a house during this ongoing recession.

Low mortgage rates and low home prices offers ample opportunity for you to invest in a house you have always longed for. Although the housing market is gradually recuperating and the signs are evident, it will not be before 2011 when the housing market is expected to stabilize.

The amount you will be paying as interest rate is vital in determining your monthly mortgage payments. If you opt for adjustable-rate mortgage, you may have to pay lower monthly payments initially. However, if the rates start rising, the amount you pay every month will also rise. In other words, the monthly mortgage payments are not predictable in case of ARM. On the contrary, FRM will allow you to make a fixed payment each month throughout the term of the loan.

Your loan term will also impact your monthly mortgage payments. If you are opting for 15 years loan term, you pay more every month but the mortgage interest rate is less. This is in sharp comparison to a 30 year loan term where you will be required to pay less each month but the mortgage rate will be quite high.

Your debt-to income ratio is also another factor that can determine your home affordability.

How will you determine your home affordability?

As a rule, you can shell out at least 3 and a 1/2 times your yearly salary on a house that you want to own. As far as monthly mortgage payments, you can spend 25% to 30% of your salary (monthly) for the same. However, lenders have become very strict as far as lending cash is concerned.

To quote Ryan Tomazin, who is associated with Integrated Asset Services as the COO says “Affordability is almost as high as it’s ever been, but what the banks are allowing people to purchase is still far more conservative than what people could afford”.

During the beginning of 2009, the number of homeowners facing foreclosure increased manifold. As of December 2008, majority of the homeowners had mortgages that were more than the value of the home. Since the real estate market hasn’t stabilized, the returns you will get on investing in real estate are not certain. According to S&P Case-Shiller 20-city index home prices are at 2003 levels approximately. However, if you are ready to take risks, there are many options open for you. If you have some cash at your disposal, you can buy a foreclosed property.