The amount of house you can afford is closely related to the size and mortgage you qualify for


A significant part of the home-buying process is determining how much you can spend on a new mortgage without jeopardizing your current responsibilities.

Our home affordability calculator will help you figure out whether or not you can afford the home of your dreams.

Where can I afford to buy a home?

For the following 15 to 30 years, your financial condition will be affected by purchasing a property. To prevent having a mortgage that you can’t afford in the long term, you must be honest about your monthly income and planned costs at packages.

Visit our top mortgage lenders page if you’re ready to purchase a home.

What we’ll go through here:

  • What is the maximum size of the home I can afford?
  • How to figure out how much house you can afford
  • Ways to make your home more affordable
  • Home affordability and the latest COVID-19 updates

The following factors will have a significant impact on the size of the property you can afford:

  • The amount of your mortgage and the length of your repayment period
  • The total of your monthly and yearly earnings
  • How much money do you have to spend each month for anything from credit cards to school loans to a vehicle payment to child support?
  • State property taxes are paid yearly or twice a year and vary from state to state in terms of frequency and amount.
  • In terms of current mortgage rates and closing expenses, which vary from area to location,
  • Condo fees and homeowner’s association (HOA) dues

Using an FHA loan, how much home can I afford?

A Federal Housing Administration (FHA) loan, often known as an FHA loan, may allow you to acquire a house with more minor limitations than a traditional mortgage, depending on your current financial status and credit score.

To qualify for an FHA loan with a credit score of 500 or better, you must spend no more than 31% of your income on housing expenditures and 43% of your income on total debt. In most cases, a 28/36 debt-to-income ratio is required. If you have less money or shorter credit history, FHA loans are suitable for you.

If your credit score is more than 580, you may be eligible for a loan with a 40/50 loan repayment ratio if you also match the other criteria.

Borrowers with a credit score of at least 580 might put down as little as 3.5 percent on an FHA loan, compared to the usual 5% or more.

Using a VA loan, how much home can I afford?

VA loans have a maximum debt-to-income ratio of 41 percent, but the VA backs loans for persons with more enormous proportions if other standards are met, such as a steady income. To qualify for a VA loan, a borrower does not need a credit score (although their interest rate will be affected by their credit score).

With a USDA loan, how much home can I afford?

Compared to conventional loans, USDA loans for rural regions are more flexible. There is no need for a down payment, and the mortgage insurance premium may be included in the loan. In other words, you may get 102 percent of the house’s worth without paying this upfront cost.

However, keep in mind that the borrower must earn no more than 115 percent of the median family income to qualify for a loan. Eligibility for an affordable house may be lower than what you can afford.

Is there a way to figure out how much you can afford to buy a house?

The affordability of your house may be determined in several ways. Entering your data into our calculator above is the quickest and most straightforward method. Your debt-to-income ratio and desired housing budget may be entered into our house affordability calculator.

This information is needed for the first technique; for the second method, it is necessary for the second method. Your down payment amount, state, credit rating, and house loan type will be required for both ways.

You may use our calculator to find out how much you can afford to spend on a home and how much you can afford to pay each month.

This is known as the 28-36 rule.

Lenders may use the 28/36 rule to assess your financial capacity to purchase a new property. By this rule:

  • Pre-tax income should not exceed 28 percent for housing costs. Your monthly principle and interest payments, house insurance, yearly property taxes, and private mortgage insurance are included in this (PMI).
  • Debt should not exceed a third of your pre-tax income. As long as these monthly debt payments are likely to continue for at least ten months, this covers credit cards, vehicle loans, personal loans, and school loans. Expenses like food, petrol, and your existing rental payment are not included.

For example, a borrower who earns $5,000 a month should not spend more than $1,400 a month on housing expenditures, according to the 28/36 rule.

It’s a decent rule of thumb to spend $1,400 a month on rent if you make $5,000 a month. When it comes to monthly mortgage payments, homeowners earning the same amount of money should be able to cover their insurance premiums and property taxes with $1,400 each month.

A person’s credit rating

Credit scores are a three-digit assessment of your creditworthiness. People with good credit get better terms on loans, while those with bad credit have to pay more upfront.

Each of the three leading credit agencies offers a free credit report once a year. If you’ve been the victim of identity theft, you may also be able to see your credit report for free.

You may also get free weekly credit reports from the three main credit bureaus owing to the CARE Act, which will be in effect until April 2022.

Amount of debt compared to annual gross income.

Using the DTI (Debt-to-Income Ratio), a person’s monthly debt payments are compared to their pre-tax family income. To evaluate how much you can borrow, or even whether you can borrow, lenders utilize this statistic.

If you’re accepted for a mortgage, your housing expenditures will be added to the debt you owe, such as credit card payments, auto payments, student loan payments, and other types of loans. For example, it doesn’t include your current rent payment or your monthly grocery bill.

Having a high debt-to-income ratio (DTI) shows that you have a lot of debt compared to your income. The greater your debt-to-income ratio (DTI), the more difficult it will be to get a mortgage. DTI ratios above 43% are often considered too high by many lenders.

Borrowers with a DTI of 36 percent or less get better interest rates from lenders. Our debt-to-income ratio calculator will help you figure out your DTI.

A down payment is required.

Buyers who do not qualify for a VA loan or a mortgage program requiring no down payment must put money down on their desired property. Conventional loans typically need a minimum down payment of 5%, but if you have a low DTI ratio, a strong credit score, and fulfill other standards, you may be able to get a loan with a down payment of as little as 3%.

The minimal down payment for FHA loans is 3.5%.

Buyers should be able to put down a minimum of 20% when purchasing a property. This is how it will work:

  1. Bring down the loan-to-value ratio.
  2. Payless each month.
  3. Assist in making it more probable that interest rates will be reduced
  4. To avoid private mortgage insurance, purchase adequate equity in your property.

Refinancing is an alternative if you don’t have enough money for a 20% down payment upfront. If the market circumstances are reasonable, you may be able to receive a higher rate this way.

If you’re interested in finding out more about refinancing, see our list of the top mortgage refinance lenders. Use our mortgage refinance calculator to see your new mortgage rate once you’ve refinanced.


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