To determine how much house you can afford, several key financial factors need to be considered:

Key Factors Affecting Affordability

• Income: Your gross annual or monthly income is the starting point.
• Monthly Debts: Recurring debts such as car payments, credit card minimums, student loans.
• Down Payment: The amount of cash you can put upfront toward the purchase.
• Interest Rate: The mortgage interest rate affects your monthly payment.
• Other Housing Costs: Property taxes, homeowners insurance, and HOA fees if applicable.

Common Affordability Guidelines

• Debt-to-Income (DTI) Ratios:
  • Lenders typically use a DTI ratio of 36% to 43%.
  • Your monthly mortgage payment (including taxes and insurance) should be no more than 36% of your gross monthly income.
  • Your total monthly debt payments (including mortgage) should not exceed 43% of your gross income

• 28/36 Rule:
  • Spend no more than 28% of your gross monthly income on housing costs.
  • Total debts should not exceed 36% of gross income

Example Calculation

If you earn $3,000 per month before taxes:

• Max monthly mortgage payment = $3,000 x 0.36 = $1,080
• Total monthly debts (including mortgage) should not exceed $3,000 x 0.43 = $1,290

Additional Considerations

• Loan Type: FHA loans have slightly different DTI limits (31% for housing costs, 43% total debts) and allow lower down payments but may have mortgage insurance costs

• Credit Score: A higher credit score can secure lower interest rates, increasing affordability

• Down Payment: Higher down payments reduce loan amount and monthly payments, increasing how much house you can afford

Tools to Use

Many online calculators (Zillow, NerdWallet, Wells Fargo, Chase) allow you to input your income, debts, down payment, and other expenses to get a personalized estimate of how much house you can afford

. Summary:
You can generally afford a house where your monthly mortgage payment is about 28-36% of your gross income, and your total monthly debts including the mortgage do not exceed 43% of your gross income. Using your income, debts, down payment, and expected interest rate in an affordability calculator will give you a more precise estimate. Getting pre-qualified by a lender will confirm your budget based on your full financial profile