One of the first questions many homebuyers ask is how much house they can afford. While the answer varies, a common guideline is that many buyers can afford a home priced at two to three times their annual household income. However, it’s quickly followed by — talk to a mortgage professional to determine what you can realistically afford.
“I can’t emphasize enough how much it benefits homebuyers to get prequalified before they talk to a realtor,” explains Kristi Amenda, a Mortgage Loan Officer with First Mid. “It’s the easiest way to set expectations and take the stress off yourself by letting us help answer that question.”
Quick Answer: How Much Home Can You Afford?
Most financial experts recommend keeping your total housing costs below about 30% of your gross monthly income. Lenders also consider factors like debt-to-income ratio, credit score, interest rates, and your down payment when determining how much home you may qualify to purchase.
Working with a lender and understanding these factors can help you start your home search with confidence.
Understand Your Options with a Mortgage Calculator
A mortgage calculator is a helpful first step when estimating how much home you may be able to afford. It allows you to explore different home prices, loan terms, and interest rates to see how they affect your monthly payment.
Example: How Much Home Can You Afford?
If your household earns $75,000 per year, your gross monthly income is about $6,250. Using the 28% affordability guideline, housing costs should stay around $1,750 per month.
Depending on your interest rate, down payment, and loan terms, that payment could translate to a home price of roughly $275,000–$325,000.
Factors That Affect Mortgage Affordability
Several factors influence how much home you may qualify for:
Income – Salary, bonuses, and other income sources
Debt-to-Income Ratio (DTI) – Your monthly debts compared to income
Credit Score – Affects mortgage approval and interest rates
Down Payment – Larger down payments can lower monthly costs
Interest Rates – Current rates influence affordability
The 28/36 Rule for Mortgage Affordability
Lenders often use the 28/36 rule as a guideline:
- Housing costs should stay below 28% of your gross monthly income
- Total monthly debt payments should stay below 36% of your gross monthly income
Housing costs typically include mortgage principal, interest, property taxes, homeowners insurance, and HOA fees (if applicable). These combined expenses are often referred to as PITI.
Example:
If your gross monthly income is $6,000:
28% = $1,680 maximum housing payment
36% = $2,160 maximum total monthly debt payments
Some loan programs — such as Conventional, FHA, and VA loans — may allow higher debt ratios depending on your financial situation.
Other Homeownership Costs to Consider
Your mortgage payment is only part of the total cost of owning a home. Other expenses may include:
Home Maintenance – Routine repairs, seasonal upkeep, and unexpected fixes
Community or Property Fees – HOA dues, landscaping services, or pest control
Utilities – Electricity, water, and heating/cooling vary with home size, efficiency, and location
How to Improve Your Homebuying Budget
As you plan to buy a home, a few steps can help strengthen your financial position:
- Pay down existing debt
- Improve your credit score
- Save for a larger down payment
- Avoid large purchases before applying for a mortgage
If you still have work to do on your credit or have experienced financial hardship, don’t be discouraged. Credit scoring models have evolved to recognize positive financial behavior — like reducing debt and making consistent, on-time payments.
Taking these steps may help improve your chances of qualifying for a mortgage and securing better loan terms. It can also be helpful to speak with a lender about your individual situation.
As Amenda explains, “Sometimes people are nervous to talk to mortgage lenders because of their credit, but that’s exactly what we’re here for. We can help them understand what steps to take next to qualify for a loan or explore options they may not realize are available.”
Get Pre-Qualified Before House Hunting
Before you begin searching for homes, getting pre-qualified helps you understand your buying power. A mortgage pre-qualification can provide:
- An estimate of how much you may be able to borrow
- A potential monthly payment range
- Loan programs you may qualify for
Tip: Working with a local lender can make a difference. Local lenders understand the communities they serve, have relationships with area realtors, and may have access to regional loan programs and first-time homebuyer resources.
“We have access to local resources like grant money for first-time homebuyers that online-only lenders don’t,” Amenda says. “And because we work in the community and have relationships with local realtors, those connections matter. If there are several offers on the table, local lenders normally take priority. Community really does matter — to us at First Mid and in the homebuying process.”
By understanding how much home you can afford, you’ll have peace of mind with local support on your side. When you’re ready, connect with a local First Mid lender to explore your options and guide you through your homebuying journey.