How Much House Can I Afford?

Table Of Content

• Income limits for down payment assistance
• Non-Traditional Employment Or Income
• Buying Options
• How does credit score impact affordability?
• What Is Private Mortgage Insurance (PMI) and How Does It Work?
• Understanding Interest Rate And Payments
• Understand Your Mortgage Options
• The income a family of 4 needs to live comfortably in every U.S. state

If you have enough for a 20 percent down payment, the maximum house you can afford is $300,000. Housing expenses that count toward your DTI include your mortgage payment, homeowners insurance, and property taxes, as well as private mortgage insurance and homeowners association fees if applicable. Most home loans require a 20% down payment, but Federal Housing Administration (FHA) loans only require a minimum of 3.5%.

Income limits for down payment assistance

Your monthly payments will now be $1,074 (excluding taxes and insurance). Need a little more help to figure out exactly how much you can afford to spend on a home? The Rocket Mortgage Mortgage Calculator helps you estimate your total loan and how much you can expect to pay each month. Play around with the mortgage calculator until you settle on a monthly payment that matches up with your budget.

Non-Traditional Employment Or Income

This is especially critical at a time when the market is dominated by steep home values and equally steep mortgage interest rates. The median existing-home sale price as of August 2023 was a record-high $407,100, according to the National Association of Realtors. And the average rate for a 30-year mortgage is equally daunting, having soared close to 8 percent as of October 2023 — as high as it’s been in more than 20 years.

Buying Options

Or, someone who has existing debt from a few different lines of credit — like credit cards and an auto loan. The $100,000 earner in our first example has an excellent credit score of 740. This person also has no monthly debts and is prepared to put down 20% on the home. With nearly two decades in journalism, Dori Zinn has covered loans and other personal finance topics for the better part of her career. She loves helping people learn about money, whether that’s preparing for retirement, saving for college, crafting a budget or starting to invest.

How does credit score impact affordability?

For example, if homes sell for an average of $150 per foot, a 1,885 square foot home will cost $282,750. If that's above or below your budget, add or subtract square footage. His work has been featured on several financial and media websites. A joint mortgage combines two individuals’ incomes, which can reduce your overall DTI ratio. At the same time, the co-applicant should have minimal debt to gain the biggest financial advantage.

What Is Private Mortgage Insurance (PMI) and How Does It Work?

For some homes, it’s just cosmetic, like changing toilet seats and painting the walls. For others, the rehab is much more significant, and you may be able to roll those estimated costs into your initial mortgage loan. Buyers say that those high prices are forcing them to spend more than they planned. There’s less benefit to putting 20% down on an FHA loan since these loans charge mortgage insurance premiums (MIP) no matter what.

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You can either move the slider or type into the field below to adjust your approximate value. Buying a new home is a big decision that involves a whole lot of smaller ones. Many people focus on the number of bedrooms or the quality of the kitchen appliances as they contemplate where they want to live. The payment for your account couldn't be processed or you've canceled your account with us. The conforming loan limit in most U.S. counties for 2024 is $, though it can increase to $ in high-cost areas.

Understand Your Mortgage Options

The Veterans Affairs Department (VA) is an agency of the U.S. government. VA loans make home ownership more possible for borrowers than it otherwise would be through conventional mortgage loans, primarily because a VA loan does not require any down payment. Additionally, interest rates offered for VA loans often turn out to be lower than those offered for conventional loans.

Note that these limits apply to total household income, not just that of the borrower. Someone who spends $3,500 in debt and earns $8,333 a month has a DTI of 42 percent. Borrowers with DTIs below 36% can usually borrow more for a home purchase.

Most states have first-time home buyer assistance programs designed to make homeownership more affordable. Talk with your lender about the programs available in your area. While your lender is willing to loan you a substantial amount of money, that doesn’t mean you have to borrow the entire amount if it would put you under significant financial strain.

You can automate repayment directly from your future paychecks. Apart from acquiring good money habits, you can also strive to change or eliminate poor money habits. "Some habits that people can change to save a bit more money is to eat out less or only buy what is necessary," Bolstad advises.

Even then, you should get quotes from multiple lenders before you finally settle on one. Because such comparison shopping is the only way to make sure you get a great deal. Check out our guide to finding open houses in your area, plus tips on how to prepare for them. There are several steps in the house-shopping process, from getting initial mortgage approval to viewing a house in person. Work with a lender to find the right loan for the home you love. It’s also important to keep in mind that variable expenses like utilities, maintenance and repairs will also come out of your budget when you own your home.

Home maintenance will cost money, and the larger and older the home, the more upkeep you’ll have to budget for. In a shared building, the HOA might take care of most maintenance. Homeowners insurance costs more in places where homeowners file more claims. A local insurance agent might be happy to give you an idea about prices in the area since you could become a future client. If you just want to ballpark it, the national average annual premium for a $250,000 home is about $1,100 (about $92/month). The best-case scenario is getting the seller to pay closing costs without increasing the purchase price.