How much house can I afford?

Finding out how much you can afford is an important stage in the home-buying process because buying a house is one of the biggest expenditures you will ever make. You should start by comparing the amount of money coming in from your employment, investments, and other sources of income to the amount going out to pay for expenses like school loans, credit card bills, and auto payments.

How much mortgage payment can I afford?

We consider a few key factors, like your family income, monthly debt obligations (such as auto and student loan payments) and the amount of money you have set up for a down payment, to determine how much property you can buy. You should feel comfortable comprehending your monthly mortgage payments as a prospective homeowner.

Even if your household’s monthly income and debt payments are predictable, unanticipated costs and impulsive spending can have an adverse effect on your savings.

Video Credit: The Ramsey Show – Highlights

Have three months’ worth of money saved up, including your monthly housing payment and any other monthly obligations. This will enable you to pay your mortgage in the event of an unforeseen circumstance.

How does your debt-to-income ratio impact affordability?

The DTI ratio, which compares your total monthly indebtedness (such as your mortgage payments, including insurance and property tax payments), to your monthly pre-tax income, is a crucial factor that your mortgage lender considers when determining the amount of money you may borrow.

You can be eligible for a greater ratio depending on your credit score, but generally speaking, housing costs shouldn’t go beyond 28% of your monthly income.

You may also like reading: Startup Financing: How It Works & How to Get It 2023

Your DTI is 28%, for instance, if your monthly mortgage payment, including taxes and insurance, is $1,260 and your gross monthly income is $4,500 before taxes. (1260 / 4500 = 0.28)

You may also use the other method, multiplying your income by 0.28 to determine what your housing budget ought to be. That would enable the $1,260 monthly mortgage payment in the aforementioned case to reach a 28% DTI. (4500 X 0.28 = 1,260)

How much house can I afford with an FHA loan?

How much house can I afford with an FHA loan?
House I afford with FHA loan

We’ve assumed that with at least a 20% down payment, you could be best served with a conventional loan in order to determine how much house you can buy. You may qualify for an FHA loan, though, if you’re thinking about making a lesser down payment—down to a minimum of 3.5%.

Consider loans guaranteed by the FHA if your credit score is poor since they may have more lenient qualification requirements. Use our FHA mortgage calculator for more information if you want to learn more about FHA loans.

Even though qualifying is a little more difficult than it is for FHA loans, conventional loans can have down payments as little as 3%.

How much house can I afford with a VA loan?

You could be eligible for a VA loan if you have a military connection. This is significant since down payments are frequently waived for Department of Veterans Affairs-backed mortgages. This significant benefit is taken into consideration by the NerdWallet Home Affordability Calculator when determining your unique affordability criteria.

Don’t forget to check the “Yes” box next to “Loan details” in the “Are you a veteran?” box.

See How to Choose the Best Mortgage for more information on different types of mortgage loans.

The 28/36 rule – what it is and how it works

The 28/36 rule, which states that you shouldn’t spend more than 28% of your gross, or pre-tax, monthly income on home-related expenses, and no more than 36% on total debts, including your mortgage, credit cards, and other loans, like auto and student loans, is a good general guideline for determining “how much house can I afford.”

For instance, if your monthly income is $5,000 and you have $500 in debt payments, your monthly mortgage payment for your home shouldn’t be more than $1,480.

Although the 28/36 guideline is a widely recognized starting point for calculating home affordability, you should also evaluate your whole financial status when determining how much property you can buy.

What factors help determine ‘how much house can I afford?’

Affordability is determined in part by your monthly income, cash reserves for a down payment and closing fees, monthly expenses, and your credit history.


Money that you consistently get, such your paycheck or interest from investments. Your monthly budget may be established using your income as a starting point.

Cash reserves

Your available funds for a down payment and closing expenses are equal to this sum. You may utilize your assets, savings, or other funds.

Debt and expenses

Your potential monthly responsibilities include those for credit cards, auto loans, school loans, food, utilities, insurance, and so forth.

Credit profile

Lenders’ perceptions of you as a borrower are influenced by your credit score and the total amount of debt you owe. These elements will influence your ability to borrow money as well as the interest rate you will pay on your mortgage.

How much can I afford to spend on a house?

Based on your input, the house affordability calculator gives you a suitable price range. Most significantly, it considers all of your monthly bills to decide whether buying a property would be comfortably within your means.

Lenders only consider your current outstanding debts when determining your capacity to finance a property. They don’t account for factors like whether you want to save an extra $250 per month for retirement or whether you want to save more money because you’re having a baby.

NerdWallet’s Home Affordability Calculator makes it simple to comprehend how taking on a mortgage debt will affect your costs and savings since you can change the information you enter to match your current financial condition and simulate other situations.

How much house can I afford on my salary?

How much house can I afford on my salary?
House I afford on my salary

An easy approach to figure out how big house you can buy with a $40,000 household salary is to apply this formula. $60,000? $100k or higher? Examine several possibilities with the help of our mortgage income calculator.

You may determine how much monthly or yearly income you would need—and even how much a lender would qualify you to borrow—by entering the price of the property, the anticipated down payment, and the projected mortgage rate.

That calculator also provides a different perspective on the question: What salary is required to purchase a $300,000 home? Or a $400 000 home?

It’s an additional means of gaining confidence in your potential house purchasing power.

Home affordability begins with your mortgage rate

You’ll undoubtedly note that any evaluation of a home’s affordability includes a projection of the interest rate you’ll pay on your mortgage. Your eligibility for a loan will be determined by the lender based on four main factors:

  1. Your debt-to-income ratio.
  2. Your history of paying bills on time.
  3. Proof of steady income.
  4. The amount of down payment you’ve saved, along with additional cash reserves for closing costs and other expenses you’ll incur when moving into a new home.

Lenders will price your loan once they have determined that you are eligible for a mortgage. That entails figuring out the interest rate you’ll pay. Your mortgage rate will be mostly based on your credit score.

Naturally, your monthly payment will be smaller the lower your interest rate.


As you tread the path to homeownership, always remember, the key question isn’t just “how much house can I afford?” but rather “how much house can I comfortably afford?” While numbers, calculations, and financial guidelines are an integral part of this journey, the importance of your peace of mind and the quality of life shouldn’t be overlooked. This journey can seem daunting at first, but armed with the right tools and knowledge, you can navigate it with confidence.

Let’s take a moment to recap what we’ve learned. First, we delved into your monthly income, essential expenses, and the importance of a debt-to-income ratio. Then, we evaluated the various mortgage options and their impact on your finances. We discussed the significance of a down payment, and how saving for it might affect your affordability. Additionally, we emphasized the importance of considering ongoing costs, including property taxes, insurance, and maintenance.

In essence, planning for homeownership is not just about figuring out numbers, but it’s about understanding your financial capacity and aligning it with your lifestyle and future goals. Take this wisdom with you on your path to homeownership, and remember: a home that suits both your needs and your financial situation is worth the wait. So, dream big but plan wisely, and embark on this journey with your head held high and your eyes wide open


What is a good rule of thumb for how much house I can afford?

A common rule of thumb is the 28/36 rule, which states that you should spend no more than 28% of your gross monthly income on housing costs and no more than 36% on total debt, including your mortgage and other debts.

What other factors should I consider when determining how much house I can afford?

Apart from your income, debt, and the mortgage rates, consider costs like home insurance, property taxes, maintenance, and potential homeowner association fees. Also, your lifestyle and future plans like starting a family or retirement can significantly impact your affordability.

Can I afford a more expensive house if I have a significant down payment?

A larger down payment can indeed lower your monthly mortgage payment, making a more expensive house more affordable in terms of monthly expenses. However, remember not to deplete your savings completely for a down payment.

Does my credit score affect how much house I can afford?

Yes, your credit score can influence the interest rate on your mortgage. A higher credit score might get you a lower interest rate, which can reduce your monthly payment and increase your affordability.

What if I overestimate how much house I can afford?

Overestimating can lead to financial strain, limiting your ability to save for other important life goals or handle unexpected expenses. It’s important to make a realistic and comfortable estimate.

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