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How Much House Can I Afford?

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This is almost always the first question we get from prospective home buyers. There is a rule of thumb that you should spend no more than 28% of your monthly gross income on total housing expenses and no more than 36% of your gross monthly income on debt overall.

That debt-to-income ratio, while important to your lender, might not give you an accurate picture for what you can afford. It’s common for buyers to qualify for more than they might want to spend. That’s why it’s helpful to think in terms of affordability, not total loan amount.

To do that, focus on your monthly payment, not the cost of the house you’re considering. By focusing on your monthly payment, and what fits comfortably in your budget, you ensure that you don’t overspend on your mortgage leaving yourself little room for life’s other expenses.

The traditional debt-to-income ratio is also a snapshot of your current situation, not a projection of the future. And one thing about life — it’s unpredictable. A more conservative approach to affordability gives you leeway should your situation change.

There are any number of mortgage calculators on the internet, but they will only give you a number based on your debt-to-income ratio. The best way to determine what affordable really means for you is to speak with a mortgage specialist.

So many choices. To help you better understand the entire home-buying process, we’ve put together an e-book — Tips From a Lender: A Homebuyer's Guide

Download a Homebuyer's Guide e-book! 

It’s a great resource for anyone in the market, but especially for first-time home buyers. You can get your own copy here.



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