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By Mayra Paris and Gabriel Rodriguez
Updated: September 20, 2021 5:13 PM ET | Originally published: July 8, 2021

How much house you can afford is directly related to the size and type of mortgage you can qualify for. Understanding how much you can comfortably spend on a new mortgage while still meeting your existing obligations is crucial during the homebuying process.

Read on to learn about home affordability, and use our home affordability calculator to find out if you can afford the house of your dreams.

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1Add Your Info
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Gross income is the amount you receive before taxes and other deductions.

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In order to get the most accurate estimate, select the credit score that best represents your credit history.

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Not sure which loan type to choose? Go with a 30 Year Fixed Rate Loan, 90%+ of Americans do.

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If your cash down payment is less than 20% of your loan amount, we will automatically apply PMI to your results.

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In order to get the most accurate estimate, select the credit score that best represents your credit history.

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Not sure which loan type to choose? Go with a 30 Year Fixed Rate Loan, 90%+ of Americans do.

Money’s calculator results are for illustrative purposes only and not guaranteed. Money uses regional averages, so your mortgage payment may vary.

2See Your Results
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We try to keep our information current and accurate. However, interest rates are subject to market fluctuations and vary based on your qualifications. Calculator results assume a good credit score and factor-in regional averages; your actual interest rate may differ. Calculator results are for educational and informational purposes only and are not guaranteed. You should consult a licensed financial professional before making any personal financial decisions.

You can afford a house worth:

$---,---

with monthly payment of

$---,---

Monthly Breakdown

Mortgage Payment
Private Mortgage Insurance
Property Tax
Home Insurance
HOA / Condo Fees

Thank you for your service! 0% downpayment and $0 PMI applied.

3What is Today's Rate?

Rate for yesterday Sep 19 was

%

Find your actual rate at Quicken Loans today!

View Your Rate For September 20, 2021

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How Much House Can I Afford?

Purchasing a home is a decision that will impact your financial situation for the next 15 to 30 years. It’s important to be realistic about your monthly income and expected expenses to avoid winding up with a mortgage loan you can’t pay in the long run. We recommend visiting our best mortgage lenders page to find the most affordable home loans.

How much house you can afford will mainly depend on the following:

  • Your gross monthly and annual income
  • Your total monthly debt or monthly expenses, including credit card debt, student loan payments, car payment, child support, and other expenses
  • state property taxes, which are paid annually or biannually and vary by state
  • loan amount, interest rates, and closing costs, both of which vary by location
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What Is the 28/36 Rule?

Lenders may determine your ability to afford a new home by using the 28/36 rule. Breaking it down, the rule establishes that:

  • Housing expenses should be no more than 28% of your total pre-tax income. This includes your monthly principal and mortgage interest rate, annual property taxes, and private mortgage insurance payments (PMI).
  • Total debt should not exceed 36% of your total pre-tax income. This includes the housing expenses mentioned above — credit cards, car loans, personal loans, and student loans — so long as these monthly debt payments are expected to continue for 10 months or more.

In concrete numbers, the 28/36 rule means that a borrower who makes $5,000 a month should not spend more than $1,400 on housing costs every month. If you’re a renter, that’s the most you should spend on your lease to maintain good financial health.

However, for a homeowner, $1,400 should cover your monthly mortgage payment, as well as homeowners insurance premiums and property taxes.

How Do You Calculate Your Home Affordability?

There are several methods for figuring out your home affordability. The easiest way is to enter your information into our calculator. Our home affordability calculator works with either your debt-to-income ratio or your proposed housing budget.

For the first method, you’ll need your gross monthly income and monthly debts; for the second, you’ll need your desired monthly payment amount. Both methods will require your down payment amount, state, credit rating, and home loan type.

Once you’ve input all the information according to the method you chose, our calculator will let you know the top amount you can pay for a house, as well as your estimated monthly payment.

Credit Score

Your credit score is a three-digit summary of your creditworthiness. A very high credit score usually corresponds to a lower interest rate, whereas having a low score will result in much higher rates.

The credit score is one of the most important factors that lenders consider when applying for a mortgage. Lenders use it to determine how likely they’ll be repaid on time if they give a person a loan.

Homebuyers have access to a free credit report once per year from each of the three major credit bureaus. You may also access your credit report for free under certain conditions, like being the victim of identity theft.

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Debt-To-Income Ratio

Debt-to-Income Ratio, or DTI, compares how much you owe to how much you earn, specifically your monthly debt compared to your monthly pre-tax income. It’s an important metric that lenders use to determine how much you can borrow — or if you can borrow at all.

A high DTI indicates that your debt is high relative to your income and vice versa. The higher your DTI, the harder it will be to get a mortgage. In fact, many lenders won’t even consider applicants with a DTI higher than 43 percent. Lenders prefer borrowers with a DTI of 36 percent or less and will offer them better interest rates on their mortgage. To calculate your DTI, use our debt-to-income ratio calculator.

Down Payment

Unless buyers are applying for a VA loan or a 0% down payment mortgage program, they will have to provide a down payment on their home. Conventional loans have a minimum down payment of 3 percent for certain buyers and 5 percent for most buyers. For FHA loans, the minimum is 3.5 percent.

Ideally, buyers should be able to provide a 20% down payment on their homes. A payment this large will:

  1. Lower your loan-to-value ratio
  2. Lower your monthly payments
  3. Make it more likely to earn a lower interest rate
  4. Buy you enough home equity to bypass private mortgage insurance

If you don’t have enough money for a down payment this large, there is the option of refinancing later on. This can get you a better rate if the market conditions are favorable.

To find out what your future mortgage rate would be after refinancing, use our mortgage refinance calculator. If you want to learn more about refinancing, check our best mortgage refinance lenders page for more information.

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House Affordability Options

There are several options to consider if you are struggling to afford the home you have your eyes on. Some methods must be undertaken over time, whereas others will immediately impact your mortgage application.

Lower DTI

DTI is one of the most important factors that lenders consider when looking at borrowers. Lowering your DTI by paying off as much existing debt as possible will put you in a better position to manage your monthly costs and any emergency expenses that may spring up. This is a good option if your DTI is too high to qualify for a reasonable interest rate (or qualify at all).

Higher Credit Score

As with any other big purchase, the better your credit score, the lower your interest rate. One way to improve your score is to pay your bills on time every month. Another is to reduce your debt — which will also lower your DTI ratio.

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Federal Loans

The type of mortgage you’re requesting will help determine a lender’s flexibility in evaluating your loan application. FHA loans, VA loans, and USDA loans all have certain benefits that may help you afford the home you want.

FHA Loans

FHA loans are insured by the Federal Housing Administration and have more relaxed qualifying standards. They feature maximum qualifying ratios of 31/43 for most applicants with a credit score higher than 500 — 31% for housing costs and 43% for total debt.

You may be allowed to have ratios as high as 40/50 with this type of loan if your credit score is over 580 and you meet other requirements.

VA Loans

Borrowers with a military connection may qualify for a VA loan. VA loans are more lenient than conventional and FHA loans. They are backed by the Department of Veterans Affairs and typically don’t require a down payment.

While the maximum DTI ratio is set at 41% in the general guidelines, the VA insures loans for people with higher ratios provided they meet other compensating factors.

If you’d like to explore VA loans further, visit our best VA loans page.

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USDA Loans

USDA loans are backed by the U.S. Department of Agriculture and offer many benefits over conventional loans. They enjoy lower interest rates, are more lenient with credit scores, and offer 100% financing, meaning you do not need to provide a down payment.

The catch is that USDA loans are designed to help finance homes only in eligible rural areas. The desired property must fall within specific geographical areas, generally outside the limits of major metropolitan centers.

If you are eligible, USDA loans have many benefits, and you may build, rehabilitate, improve or relocate a dwelling as your primary residence to your new location.

Higher Down Payment

Most applicants will need to put at least 20% down on their mortgage if they want to avoid paying for private mortgage insurance. While there are options if you don’t have that much money upfront, increasing your down payment could reduce your interest rate, monthly payment, and DTI ratio considerably.

Home Affordability and the COVID-19 Pandemic

The coronavirus pandemic and the resulting economic downturn have shaken up the real estate market. As of June 2021, mortgage rates remain at historic lows, but there is no way to know whether they will fall even lower or start to move back up.

The fact remains that interest rates are lower right now than they have ever been. If you are in a good financial position to purchase a home at the moment— meaning you have enough cash for a down payment, a good or great credit score, stable employment, and a low debt-to-income ratio — it may make sense for you to take that step now rather than later.

Home Affordability Calculator FAQ
What is the rule of thumb for house affordability?
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As a rule of thumb, you should follow the 26/36 rule. This means your monthly mortgage payment should not exceed 28% of your gross monthly income, while your total debt should not exceed 36% of your total pre-tax income. Moreover, you should have three months of payments in reserve, including your housing payment and other monthly debts.
Why is house affordability calculated before taxes?
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When calculating house affordability, lenders want a somewhat aggressive picture of your spending ability. By including your gross monthly income — instead of your net income — in the equation, they get to see how much you could hypothetically afford before taxes.
Can I afford a 300k house on a 100k salary?
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You should not have any problems affording a 300k house on a 100k salary unless your debt is substantial. Consumers should typically be able to afford a home priced two to three times their gross income.
How can I buy a house if my affordability is low?
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Thanks to FHA, VA, and USDA loans, those struggling with home affordability still have a chance to buy a house. These types of loans have certain benefits that make them more accessible to certain sectors of the population. However, they also have other requirements that must be met for your home loan to be released.
Do you include all expenses when calculating house affordability?
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You'll want to include most of your current debt expenses when calculating house affordability. However, it's also important to include any future costs you expect, such as college for your children.
How much income do you need to buy a $450,000 house?
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How much income you need to buy a house in a specific price range may vary widely based on the type of loan, location, loan term, and other factors. As an example, with a 3.5% interest rate from an FHA loan and a down payment of $90,000 (20%), you would need to earn approximately $67,200 per year to afford a $450,000 house.