Introduction
Before touring homes, the most important question to answer is, “How much home can I afford?” The right budget prevents disappointment, keeps your finances on track, and positions you to move quickly when you find the right property. Here are five key tips to figure it out.
1. Start with Pre-Approval
Getting pre-approved for a mortgage shows you what lenders think you can afford. This should be the first step in your step-by-step home buying guide.
2. Understand the 28/36 Rule
Most lenders recommend spending no more than 28% of your gross monthly income on housing, and no more than 36% on total debt (including car loans, credit cards, and student loans).
3. Consider All Monthly Costs
Your mortgage is only part of the payment. Property taxes, insurance, HOA fees, and utilities can add hundreds of dollars per month. Thinking of selling, too? Learn how to price your home right so buyers in your market understand true costs.
4. Don’t Forget the Down Payment
A higher down payment lowers your loan balance and may reduce your interest rate. Plan ahead for closing costs and moving expenses as well.
5. Factor in Your Credit Score
A strong credit score can mean lower interest rates and better loan options. If debt or credit are concerns, explore how to boost your credit before buying.
Final Thoughts
Knowing how much home you can afford is about more than just numbers. It is about setting realistic expectations and making decisions with confidence. Use these tips as your foundation, then work with a lender and your agent to fine-tune the details. Knowing how much home you can afford sets the foundation for success. Combine this with our step-by-step home buying guide, learn how to price your home right if selling, and see how to boost your credit before buying to strengthen your position.
Your questions, answered
How do lenders decide how much I can afford?
They use factors like income, debt-to-income ratio, credit score, and down payment size.
Should I rely only on online affordability calculators?
Calculators are a great starting point but do not account for all expenses like repairs, HOA fees, or future lifestyle changes.
How much should I spend on housing each month?
A common rule is 28–30% of gross monthly income, but your personal comfort level matters too.
