How much house can I afford?
A house is one of the biggest purchases you can make, so figuring out how much you can afford is a key step in the home-buying process. You’ll need to start by weighing how much money you have coming in — your monthly earnings from your job, investments and any other streams of income — versus how much you have going out to cover costs like student loans, credit card balances and car payments.
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Your recommended budget should be a comfortable fit for your finances — ideally keeping housing costs below 28% of your gross monthly income.
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Your max purchase budget is the maximum loan amount that lenders could approve based on a 43% debt-to-income ratio. This may feel tight month-to-month.
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How to determine how much house you can afford
Do current mortgage rates impact affordability?
Yes — a 1% rate change on a $400,000 loan affects your monthly payment by roughly $240. Today’s rates are near 6.74% for a 30-year fixed loan.
Does credit score impact affordability?
A score above 760 typically gets the best rates. Scores below 620 may not qualify for conventional loans and face higher rates on FHA mortgages.
Does debt to income ratio impact affordability?
Most lenders require a DTI below 43%. The lower your existing debt, the more you can borrow for a home.
How much can I afford on my salary?
A general rule: your home price should not exceed 2.5–4× your annual income. At $100,000/year, that puts you in the $250,000–$400,000 range.
Does down payment size impact how much house I can afford?
Every extra $10,000 down reduces your monthly payment by roughly $60 and eliminates PMI once you hit 20%.
Does the type of home loan impact affordability?
FHA loans require only 3.5% down. VA loans require $0 down for qualified veterans. Conventional loans offer better rates with 20% down.
Calculator: Start by crunching the numbers
Input these numbers into our Home Affordability Calculator to get a clear idea of your homebuying budget:
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Figure out how much you (and your partner or co-borrower, if applicable) earn each month. Include all your revenue streams, from alimony to investment profits to rental earnings.
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Next, list your estimated housing costs and your total down payment. Include annual property tax, homeowners insurance costs, estimated mortgage interest rate and the loan terms (how many years).
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Enter monthly debt payments — car loans, student loans, credit cards. This is critical for calculating your back-end debt-to-income ratio.
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Click Calculate to see both your recommended and maximum purchase budgets.
Why it’s smart to follow the 28/36% rule
Most financial advisors agree that people should spend no more than 28 percent of their gross monthly income on housing expenses, and no more than 36 percent on total debt. The 28/36 percent rule is a tried-and-true home affordability rule of thumb that establishes a baseline for what you can afford to pay every month.
As you think about your mortgage payments, it’s important to understand the difference between what you can spend versus what you can spend while still living comfortably and limiting your financial risk. Your housing budget will be determined partly by the terms of your mortgage, so in addition to doing an accurate calculation of your existing expenses, you want to have an accurate picture of your loan terms and shop for the best rates.
How much mortgage payment can I afford?
Let’s say you earn $100,000 a year, which is $8,333 per month. By using the 28 percent rule, your mortgage payments should add up to no more than $2,333 per month.
However, there are a lot of factors that can impact your monthly mortgage outlay, including what kind of loan you have, your interest rate, the cost of property taxes and homeowners insurance and your overall financial picture. Using an affordability calculator helps you account for all of these.
Despite the Federal Reserve’s rate cuts in 2024, mortgage rates for a 30-year home loan continue to hover near the 7 percent mark. When mortgage rates are high, borrowers have to pay more each month — meaning they qualify for a smaller home. As an example, let’s say you buy a $600,000 home with a 20 percent down payment, taking out a 30-year loan. With a 6 percent interest rate, the principal and interest would be $2,878 per month, according to our mortgage calculator.
How to determine how much house you can afford
Do current mortgage rates impact affordability?
Yes — a 1% rate change on a $400,000 loan affects your monthly payment by roughly $240. When rates are high, you qualify for a smaller loan at the same payment. With today’s rates near 7%, buyers are qualifying for homes that are $50,000–$100,000 less than they would have at 2021’s historic lows.
Does credit score impact affordability?
Your credit score is the foundation of your finances, and it plays a critical role in determining your mortgage rate. A score above 760 typically gets the best rates. Scores below 620 may not qualify for conventional loans and face higher rates on FHA mortgages. Even a 50-point improvement can drop your rate by 0.25–0.5%, saving tens of thousands over the loan life.
Does debt to income ratio impact affordability?
Lenders will look at your debt-to-income ratio (DTI) to get a clear picture of how risky it is to loan you money. Most lenders require a DTI below 43%. To calculate: add up all monthly debt payments, then divide by gross monthly income. A DTI of 36% or below puts you in the strongest position.
How much can I afford on my $100,000 salary?
At $100,000/year ($8,333/month), the 28% rule suggests a maximum housing payment of $2,333/month. Depending on interest rates, taxes, and down payment, this typically translates to a home price of $350,000–$450,000. With a 20% down payment and a 6.74% rate, you could likely afford a home in the $400,000 range.
Does the amount of my down payment impact how much house I can afford?
The down payment is an essential component of home affordability. The more you put down upfront, the less you need to borrow. Every extra $10,000 down reduces your monthly payment by roughly $60 and eliminates PMI once you hit 20%. A larger down payment also often qualifies you for better interest rates.
Does the type of home loan impact affordability?
FHA loans require only 3.5% down (scores 580+) but charge mortgage insurance. VA loans require $0 down for qualified veterans and offer competitive rates without PMI. USDA loans offer no-down-payment options in rural areas. Conventional loans offer the best rates with 20% down and no PMI.
I’m a first-time homebuyer. How much can I afford?
First-time buyers should look into programs specifically designed for them — including FHA loans (3.5% down), state first-time buyer grants, and down payment assistance programs. Many states offer closing cost assistance and favorable rates. As a first-timer, focus on keeping your total housing costs at or below 28% of gross income.
How to improve your home affordability
Boost your credit score
Pay down credit card balances, avoid new credit inquiries, and dispute any errors on your credit report. Even a modest improvement can unlock a better rate.
Save a larger down payment
A 20% down payment eliminates PMI, reduces your loan amount, and often qualifies you for better rates — dramatically improving your buying power.
Pay down existing debt
Lowering your DTI by paying off car loans or student loans increases the mortgage payment you can qualify for. Every $100 in monthly debt you eliminate can increase your buying power by $15,000–$20,000.
Shop for better rates
Getting quotes from multiple lenders can save you thousands. Even a 0.25% rate difference on a $300,000 loan saves roughly $15,000 over 30 years.
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