How Much House Can You Afford? A Beginner’s Guide

📊 1. The 28/36 Rule: A Quick Way to Estimate Affordability

Many financial experts use the 28/36 rule as a guideline for home affordability:

✅ No more than 28% of your gross monthly income should go toward your mortgage payment (including principal, interest, taxes, and insurance – PITI).

✅ No more than 36% of your gross monthly income should go toward all monthly debts, including mortgage, car loans, student loans, and credit cards.

📌 Example Calculation:

If you earn $6,000 per month (before taxes):

28% of $6,000 = $1,680 maximum mortgage payment

36% of $6,000 = $2,160 maximum total debt payments

If you already have $400 in student loans and $200 in car payments, your maximum mortgage budget would be around $1,560 per month.

💡 2. Key Factors That Impact Your Home Budget

Several factors influence how much home you can afford, including:

🔹 Credit Score

A higher credit score means better interest rates, which lowers your monthly payment. A lower score can mean higher costs over time.

🔹 Down Payment

A higher down payment reduces your loan amount. Many lenders recommend 20% down, but there are options with as little as 3-5% down (e.g., FHA, VA, and conventional loans).

🔹 Debt-to-Income Ratio (DTI)

Your DTI ratio (total monthly debts divided by gross income) determines how much lenders will approve you for.

🔹 Loan Type & Interest Rate

Your mortgage type (fixed-rate, adjustable-rate, FHA, VA) and your interest rate directly impact affordability. A lower interest rate means lower monthly payments.

🖩 3. Use an Online Mortgage Calculator

Instead of manually calculating, use a mortgage calculator to estimate home affordability based on:

🔹 Income

🔹 Down payment

🔹 Interest rate

🔹 Loan term

🔹 Property taxes & insurance

📌 Try Our Free Mortgage Calculator Here

💰 4. Other Hidden Costs of Homeownership

Beyond the mortgage, homeowners must budget for:

🏡 Property taxes – Varies by location🏡 Home insurance – Required by lenders🏡 HOA fees – If applicable🏡 Maintenance & repairs – Estimated at 1-2% of home value per year🏡 Utilities – Electricity, water, gas, internet

✅ 5. Get Pre-Approved Before You Start Shopping

A mortgage pre-approval tells you exactly how much you qualify for, giving you a competitive edge in the market. It also helps you stay within budget and avoid disappointment.

📌 Start Your Pre-Approval Process Here

📢 Final Thoughts: Buy Smart, Not Big

While it’s tempting to stretch your budget, it’s best to stay within your means. A home should be a financial blessing, not a burden. By using the 28/36 rule, understanding key factors, and preparing for hidden costs, you’ll make a confident and informed home purchase.

👉 Need help calculating how much home you can afford? Contact us today for a free consultation! 📞