How Much Home Can You Afford?

May 14, 2024 Buying A Home

Can you afford your dream home? Use these tips during your home search to help avoid overextending yourself after the purchase.

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Dreaming of buying a new house? Whether it’s your first or one of many, it’s fun to think of building, designing, and decorating. However, one thing you don’t want is to find out you can’t afford your home once you’ve committed to it. According to a 2023 report, of the 575 U.S. counties examined, home prices in 99% of those areas are beyond the reach of the average income earner, who makes $71,214 a year.

However, your dream of becoming of a homeowner isn’t impossible. Use these tips to get an idea of how much home you can afford.

Prepare To Buy  

Evaluate Your Budget

When evaluating your budget, make sure you only consider income you receive on a consistent basis, such as your salary and investment income. For loan purposes, you may be able to add commissions or overtime into your income as long as you can show a history of receiving it.

A general rule of thumb is that your mortgage payment shouldn’t exceed 28% of your gross monthly income. While this is a general guideline, there could be extra wiggle room in your budget if you have little debt or sizeable savings.

While this is a good starting point, you’ll want to consider your entire financial situation when determining how much home you can afford. Remember that owning a home or purchasing a bigger one will likely increase your bills, and items like a pool will require additional maintenance.

Mortgage Qualifier Calculator

Use our free calculator to determine how much you can borrow based on your income, purchase price, or total monthly payment.

Assess Your Debt  

When factoring additional debt into a mortgage payment, it’s recommended you use the 43% debt-to-income ratio or DTI rule. This means your mortgage, auto, and other debt payments shouldn’t exceed 43% of your gross monthly income.

Here’s the formula for calculating your DTI:

DTI equals debt divided by income multiplied by 100

You can also use this calculator for ease.

Calculate Your Down Payment 

The amount you’re able to pay toward the down payment will impact your future monthly mortgage payments. Just like with other loans, the more you put down, the lower your payments will be.

While putting 20% of the purchase price down can help reduce costs, it’s not a requirement for many programs. Conventional loans, like those offered at A+FCU, will usually only require a 5% down payment but will have Private Mortgage Insurance (PMI) added to the loan.* Government-backed loans may require even less or no down payment, depending on the type of loan.

Research Ways To Save

Saving money is important when purchasing a home. You’re going to need funds for a down payment, closing costs, monthly payments, and even furniture and decorations. If you don’t already have a budget in place, now’s the time to start tracking your spending and consider making a long-term plan.


Remembering these tips and setting realistic expectations will help you better search for the home of your dreams without going over budget.

Membership required. Programs, rates, terms, and conditions are subject to change without notice. Normal lending criteria apply. All loans subject to credit approval. Rates are subject to credit score, loan-to-value matrix adjustments, and normal credit underwriting factors. Property must be located in Texas and primary owner-occupied single family residence. NMLS #405608.


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