You can also take analysis a step further, and use other available calculators online to determine if you will be able to afford monthly amount that you had form calculate for you. You'll need a little more information to determine whether or not you can financially afford to purchase home based on monthly payment, such as approximate amount of yearly taxes, and total of your other monthly payments. The calculators that analyze whether or not you can afford home will calculate how much your salary should be based on information you've entered.

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Mary borrows $9,000 from Bank A and buys a car. The car dealer then deposits $9,000 into their account at Bank B.

Bank B Deposit: $9,000 Reserve (10%): $900 Lendable Amount: $8,100

Mark borrows $8,100 from Bank B and has surgery. The doctor then deposits $8,100 into his account at Bank C.

Bank C Deposit: $8,100 Reserve (10%): $810 Lendable Amount: $7,290

Sue borrows $7,290 and shops at Versace. Versace then deposits $7,290 into their account at Bank D.

Bank D Deposit: $7,290 Reserve (10%): $729 Lendable Amount: $6,561

Kim borrows $6,561 from Bank D and pays off her credit card, Credit Card Company then deposits $6,561 into their account at Bank E.

Bank E Deposit: $6,561 Reserve (10%): $656.10 Lendable Amount: $5,904.90

And so on through system. When M1* is measured, and FRB totals checking account balances in entire system, original $10,000 deposit will have created a total of $100,000 in deposits system wide.

*M1 = First level of money supply = All currency held by public.

---- End Example ----

That in its simplest form is how banks create money. Now considering how much money banks are making off of every dollar you deposit, does 0.01% or 0.25% interest rate you’re getting paid seem fair?

Not to me, but because general public is uninformed of this fact of life, banks and other financial institutions will continue to reap extraordinary profits from practically imaginary money.