How Much Home Can I Afford / What Will My Monthly Payments Be?

How Much Home Can I Afford / What Will My Monthly Payments Be?

Mortgage
May 02, 2025•2 min read

Why “How Much Can I Afford?” Is the Right First Question

Before browsing listings or falling in love with a dream home, the smartest first step is understanding how much home you can truly afford. This isn’t just about what a lender will approve—it's about what fits your lifestyle and long-term financial goals.

Lenders look at several key factors when deciding how much you can borrow: your income, debt-to-income ratio, credit score, down payment, and current interest rates. But you should also consider what monthly payment feels comfortable—not just what’s technically possible.

The 28/36 Rule: A Quick Starting Point

Most lenders follow the “28/36 rule” as a basic affordability guide:

  • 28% of your gross monthly income can go toward housing expenses (mortgage, taxes, insurance).

  • 36% should be your maximum for total monthly debt, including student loans, car payments, credit cards, and your mortgage.

For example, if you make $6,000/month before taxes:

  • 28% = $1,680 for total housing costs

  • 36% = $2,160 for all debt obligations

This gives you a ballpark, but the actual number may vary depending on the loan program, credit profile, and lender guidelines.

Breaking Down Monthly Payments

Your mortgage payment is made up of more than just the loan principal. Here's what you'll typically see in a monthly bill:

  • Principal – The amount you borrowed

  • Interest – What you’re charged to borrow

  • Taxes – Local property taxes

  • Insurance – Homeowner’s and sometimes mortgage insurance

This is often abbreviated as PITI (Principal, Interest, Taxes, Insurance).

Use an online mortgage calculator to experiment with different home prices and down payments to see how monthly payments change. Here's a simple tool:
https://www.mortgagecalculator.org/

What Impacts Monthly Payments the Most?

  • Loan amount – Higher loans = higher payments

  • Interest rate – A lower rate can save hundreds each month

  • Loan term – A 15-year loan has higher payments, but you pay it off faster

  • Property taxes – Varies widely by location

  • HOA fees – Not included in your mortgage, but part of your housing costs

  • Down payment – More money down = smaller loan

Affordability Is Personal

Some buyers prefer to stay well below the max amount they’re approved for, giving themselves breathing room for travel, savings, or family goals. Others are comfortable pushing limits for their ideal home.

Talk with a loan officer early. They can help you understand not just what you qualify for, but what makes sense for you.

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