Understanding Home Affordability + Free Mortgage Calculator
If you’re a first-time buyer, the most important number isn’t the listing price; it’s the monthly payment you can comfortably sustain for the next 15 to 30 years. Most people start with a dream home in mind and work backward. The smarter move is to start with your income and debts, build your budget from the ground up, and then find the home that fits it.
This guide walks you through every factor that determines what you can afford: income, debt, down payment, loan type, and the hidden costs most first-timers miss. Use the calculator below to find your personal number, then read on to understand exactly what’s behind it.
Home Affordability Calculator: Determining How Much House You Can Afford
To help you better understand how much you have in your budget to pay mortgage premiums each month, use our home affordability calculator.
Add as many details as you can, and make adjustments, to better understand how affordable buying a house will be for you. Everyone’s situation is different, and this calculator will show you if you can buy without overstretching your finances.
Your Finances
Loan Details
Monthly Costs
- Important Calculator Disclosure
- There is NO WARRANTY, ACTUAL OR IMPLIED, for the accuracy of this information. The Monthly Mortgage Payment Calculator provides an estimate of only the principal and interest portion commonly known as P&I and 1/12 of the approximate annual real estate taxes of the total monthly mortgage payment. Monthly charges and fees, if applicable, for hazard insurance, flood insurance, homeowners association dues and/or mortgage insurance are not included. The figures are only an estimate and should not be construed as a binding commitment or the actual final monthly mortgage payment. Rates are subject to change. Provider does not assume liability for error.
The Quick Answer: How Much House Can You Afford?
Most lenders use the 28/36 rule as their starting benchmark:
- Your monthly mortgage payment (principal, interest, taxes, and home insurance) should not exceed 28% of your gross monthly income
- Your total monthly debt payments, including the mortgage, should not exceed 36% of your gross monthly income
Worked example: Say your household earns $90,000 per year, or $7,500/month gross. You have a $400/month car payment and $200/month in student loan payments, $600 total in existing debt.
- 28% of $7,500 = $2,100 maximum mortgage payment
- 36% of $7,500 = $2,700 total debt cap, minus $600 existing = $2,100 available for mortgage (same result here)
- At a 7% mortgage rate on a 30-year loan with 10% down, $2,100/month supports a home price of roughly $280,000–$295,000
Your actual number depends on your credit score, current mortgage interest rates, and the specifics of your loan. The calculator above runs this math precisely for your situation.
What You Need Before You Buy
Before you start scheduling showings, you need three things in place: a down payment, cash for closing costs, and reserves left over after both. Most first-time buyers prepare for one and get surprised by the others.
A Down Payment (and More)
The down payment is the percentage of the home purchase price you pay upfront. The rest becomes your mortgage.
| Down Payment | What It Means |
|---|---|
| 3–3.5% | Minimum for FHA and some conventional loans; requires mortgage insurance |
| 10% | Reduces mortgage insurance costs on FHA loans; more equity from day one |
| 20% | Eliminates private mortgage insurance (PMI); typically unlocks the best rates |
The 20% advantage: On a $300,000 home, a 20% down payment ($60,000) compared to 5% ($15,000) saves you roughly $150–$200/month in PMI alone, plus a lower interest rate and less total interest paid over the life of the loan. The difference can exceed $50,000 over 30 years.
If you’re a first-time buyer without 20%, that’s completely normal. Just factor the extra monthly costs into your affordability math.
Closing Costs
Most buyers focus so hard on saving for a down payment that they forget about closing costs, and then get caught short. Closing costs typically run 3–5% of the purchase price and must be paid upfront at the time of closing.
Common closing costs include:
- Loan origination fees
- Home appraisal and inspection
- Title insurance
- Attorney fees (required in some states)
- Property taxes and homeowners’ insurance
- Real estate agent fees: note that since 2024, buyer’s agent fees are no longer automatically covered by the seller. Depending on your agreement, you may owe 2–3% of the purchase price directly.
On a $300,000 home, budget $9,000–$15,000 for closing costs on top of your down payment.
Cash Reserves After Closing
Many lenders want to see that you’ll have money left in the bank after closing, typically 2–3 months of mortgage payments. Beyond qualifying, having reserves protects you.
Homeownership brings unexpected costs: a water heater that fails, a roof that needs patching, an HVAC system that quits in August. A good target is 3–6 months of total housing costs in an accessible emergency fund.
How Your Debts Affect What You Can Borrow: Understanding Your Debt-to-Income Ratios
When you apply for a mortgage, lenders calculate your debt-to-income ratio (DTI): your total monthly debt payments divided by your gross monthly income.
DTI = Monthly Debt Payments ÷ Gross Monthly Income
Most conventional lenders cap qualifying DTI at 43–45%. FHA loans may allow up to 50% in some cases. But qualifying and comfortably affording are different things; a 43% DTI leaves very little margin for savings, emergencies, or life changes.
What counts as monthly debt: Minimum credit card payments, student loans, car loans, personal loans, child support, or alimony. Utilities, subscriptions, and groceries do not count.
If you have significant debt, you have two levers before applying: pay down balances to reduce monthly minimums, or increase your income. Even reducing your credit card balances enough to lower the minimum payment can meaningfully change your qualifying amount.
Your Credit Score and Why It Matters More Than You Think
Your credit score doesn’t just determine whether you get approved; it determines what interest rate you pay, which affects every monthly payment for the life of the loan.
| Credit Score | Loan Access | Typical Impact |
|---|---|---|
| 500–579 | FHA only (10% down required) | Highest rates available |
| 580–619 | FHA (3.5% down); limited conventional | Higher rates |
| 620–679 | Most conventional loans | Average rates |
| 680–739 | All loan types | Better rates |
| 740+ | All loan types | Best available rates |
What a score difference costs: On a $280,000 mortgage, the difference between a 680 and a 760 credit score could be 0.5–0.75% in interest rate, which works out to roughly $80–$120/month, or $30,000–$45,000 over a 30-year loan.
If your credit score needs work, the most impactful steps are: pay all bills on time for 6–12 months, pay down revolving credit card balances below 30% of your credit limit, and avoid opening new accounts before applying.
Choosing the Right Mortgage
Not all mortgages are built the same, and the wrong choice can cost you tens of thousands of dollars over the life of the loan. The two decisions that matter most are the rate structure (fixed vs. adjustable) and the loan term (15 vs. 30 years); everything else flows from there.
Fixed-Rate vs. Adjustable-Rate
Fixed-rate mortgage: The interest rate stays the same for the entire loan term. Monthly payments are predictable. Available in 15-year and 30-year terms (30-year means lower monthly payments but significantly more total interest paid).
Best for: Buyers who plan to stay in the home long-term and want payment stability.
Adjustable-rate mortgage (ARM): Offers a lower fixed rate for an initial period (commonly 5, 7, or 10 years), then adjusts periodically based on a market index. Your payment can rise, sometimes significantly, after the fixed period ends.
Best for: Buyers who are confident they’ll sell or refinance before the fixed period expires. Risky if you stay longer than planned.
15-Year vs. 30-Year
On a $280,000 loan at 7%:
| 15-Year | 30-Year | |
|---|---|---|
| Monthly payment | ~$2,516 | ~$1,863 |
| Total interest paid | ~$172,900 | ~$390,700 |
| Total cost | ~$452,900 | ~$670,700 |
The 30-year saves you $653/month. The 15-year saves you $217,800 over the life of the loan. Neither is wrong; it depends on your cash flow and goals.
Government-Backed Loan Programs
FHA loans: Backed by the Federal Housing Administration. Allows credit scores as low as 580 with 3.5% down. Requires mortgage insurance premiums (MIP) for the life of the home loan (unless you put 10%+ down, in which case MIP drops off after 11 years). Good for borrowers with limited savings or imperfect credit.
VA loans: Available to eligible veterans, active-duty service members, and some surviving spouses. No down payment required, no private mortgage insurance, competitive rates. One of the best mortgage products available to those who qualify.
USDA loans: For homes in USDA-designated rural areas. No down payment required. Income limits apply. Worth checking if your target area qualifies, the USDA’s definition of “rural” is broader than most people expect.
Conventional loans: Not government-backed. Typically requires a 620+ credit score and 3–20% down. With 20% down and strong credit, these often offer the best terms of any mortgage loan type.
The Full Cost of Homeownership: What Renters Miss
Mortgage lenders only approve you for the mortgage payment. But owning a home costs more than that every month. Before you decide what you can afford, account for:
Property taxes: Vary widely by location. In high-tax states like New Jersey or Illinois, taxes on a $350,000 home can run $7,000–$10,000/year ($580–$835/month). In low-tax states, the same home might be $2,000–$3,000/year. Look up the actual tax rate for the area you’re targeting.
Homeowners insurance: Typically $1,000–$2,500/year nationally, but can be much higher in areas prone to hurricanes, wildfires, or flooding.
HOA fees: If you’re buying in a condo or planned community, monthly HOA fees can range from $100 to $1,000+. These are non-negotiable and must be factored into affordability.
Maintenance and repairs: A common rule of thumb is to budget 1% of the home’s value per year for maintenance. On a $300,000 home, that’s $3,000/year or $250/month. Older homes and those with large lots or aging systems may need more.
Utilities: A house typically costs more to heat, cool, and power than an apartment. Budget for a meaningful increase, especially if you’re upgrading to a larger space.
Add these up alongside your mortgage payment to get your true monthly housing cost; that’s the number to compare against your income.
Are You Actually Ready to Buy Right Now?
High income doesn’t automatically mean mortgage-ready. Run this checklist:
- Down payment saved: enough for your target down payment plus closing costs
- Emergency fund intact: you’ll still have 3+ months of expenses after closing
- Debt under control: your DTI with the new mortgage is below 43%, ideally below 36%
- Stable income: most lenders want 2 years of employment history in the same field
- Credit score: at or above the threshold for the loan type you want
- Pre-approved, not just pre-qualified: a formal pre-approval letter from a lender
If you’re not there yet, that’s not a reason to give up, it’s a roadmap. Identify which item needs the most work and focus there first.
How to Improve Your Buying Power
If the calculator came back lower than you hoped, you’re not out of options. There are six concrete levers you can pull; some take months, some take longer, but each one moves the number in your favor.
Pay down debt. Even eliminating a $200/month car payment can increase your qualifying mortgage amount by $30,000–$40,000, depending on the rate. High-interest credit card debt is the priority.
Improve your credit score. Six months of on-time payments and lower credit utilization can meaningfully improve your score and your rate.
Increase your income. A raise, a promotion, or consistent freelance income (documented for two years on tax returns) can substantially improve your DTI.
Save a larger down payment. More down means a smaller loan, lower monthly payment, and potentially no PMI, all of which reduce your monthly burden.
Adjust your target price. Compromising on size, location, or features might mean buying a home you can genuinely afford rather than one that stretches you dangerously thin. The first home rarely needs to be the forever home.
Wait and save. There’s no shame in renting another 12–24 months if it means entering homeownership from a position of strength rather than stress.
Frequently Asked Questions
These are the questions first-time buyers ask most, covering income thresholds, credit scores, debt, down payments, loan terms, and the difference between the mortgage you can qualify for and the one you can actually afford.
How much house can I afford on a $70,000 salary?
On $70,000/year ($5,833/month gross), the 28% rule puts your maximum mortgage payment at about $1,633/month. With no other debts and good credit, that supports a home price of roughly $220,000–$250,000 at current rates with 10% down. Existing debts reduce that number. Use the calculator above for a precise figure.
What credit score do I need to buy a house?
Minimum 580 for an FHA loan with 3.5% down. Minimum 620 for most conventional loans. You’ll get the best interest rates at 740 or above. VA and USDA loans have no official minimum, but most lenders want 580–620.
What is the debt-to-income ratio for a mortgage?
Most lenders want your total DTI, all monthly debt payments,, including the new mortgage, below 43%. Conventional loans typically cap at 43–45%. FHA can go to 50% in some cases. A lower DTI means better terms and a more comfortable payment.
How much should I save before purchasing a house?
At minimum: your down payment + 3–5% for closing costs + 2–3 months of mortgage payments in reserve. On a $300,000 home with 10% down, that means having roughly $50,000–$65,000 saved before you start making offers.
What’s the difference between pre-qualification and pre-approval?
Pre-qualification is an informal estimate based on self-reported information, useful for rough planning, but sellers don’t take it seriously. Pre-approval requires verified income, a credit check, and asset documentation, and results in a conditional commitment letter for a specific loan amount. Always get pre-approved before house-hunting.
Is it better to put 20% down or keep cash in savings?
If putting 20% down would drain your emergency fund, the better choice is usually a smaller down payment with reserves intact. PMI costs money, but having no cash cushion as a new homeowner is riskier. A common approach is to put 10% down, maintain a healthy emergency fund, and refinance once you’ve built 20% equity.
Can I purchase a house with student loan debt?
Yes. Student loans factor into your DTI like any other debt. If you’re on income-driven repayment with a low or $0 payment, FHA lenders may still calculate 0.5–1% of your outstanding balance as a monthly obligation. Refinancing to a lower monthly payment before applying can improve your qualifying amount.
Should I get a 15-year or 30-year mortgage?
The 30-year offers lower monthly payments and more cash flow flexibility. The 15-year saves you dramatically more in total interest, often $150,000–$250,000 on a typical loan. If you can comfortably afford the higher 15-year payment, it builds wealth faster. If the 15-year payment feels tight, the 30-year is safer, you can always make extra principal payments when your finances allow.
Next Steps
You now have everything you need to move forward with confidence. Here are the four steps to take this week, in order, to go from knowing your number to getting ready to make an offer.
- Run the calculator above with your real income, debts, and savings to get your number
- Check your credit score: free through most bank apps or annualcreditreport.com
- Contact 2–3 lenders for pre-approval: comparing offers can save thousands
- Start house-hunting with a clear price ceiling, and stick to it
The goal isn’t to qualify for the largest mortgage possible. It’s to find a home you’ll enjoy living in without lying awake wondering if you can make the payment. That peace of mind is worth more than the extra bedroom.
Final Thoughts on Figuring Out How Much Home Can I Afford: First-Time Home Buyer Guide
What you can afford comes down to five core factors: your gross income, your existing monthly debts, your credit score, the size of your down payment, and the true all-in monthly cost of the home, mortgage, taxes, insurance, and maintenance combined. Get those numbers right, keep your DTI below 36%, and leave yourself a cash cushion after closing, and you’ll be buying your first home from a position of strength rather than stress.
Hopefully, this article and our calculator have opened your eyes to the costs involved, so that you can avoid an expensive mistake.
- Important Disclosure
- 20% down payment example for a 30-year fixed-rate Conventional loan: Total sales price $300,000, down payment $60,000, loan amount $240,000, interest rate 6.5%, Annual Percentage Rate (APR) 6.691%, final principal and interest payment $1,516.96.
20% down payment example for a 15-year fixed-rate Conventional loan: Total sales price $300,000, down payment $60,000, loan amount $240,000, interest rate 6.5%, Annual Percentage Rate (APR) 6.815%, final principal and interest payment $2,090.66.
20% down payment example for a 30-year fixed-rate Conventional loan: Total sales price $280,000, down payment $56,000, loan amount $224,000, interest rate 7%, Annual Percentage Rate (APR) 7.208%, final principal and interest payment $1,490.28.
20% down payment example for a 15-year fixed-rate Conventional loan: Total sales price $280,000, down payment $56,000, loan amount $224,000, interest rate 7%, Annual Percentage Rate (APR) 7.337%, final principal and interest payment $2,013.38 .
10% down payment example for a 30-year fixed-rate FHA loan: Total sales price $295,000, down payment $29,500, loan amount $265,500, interest rate 7%, Annual Percentage Rate (APR) 7.183%, final principal and interest payment $1,766.38.
10% down payment example for a 30-year fixed-rate Conventional loan: Total sales price $250,000 down payment $25,000, loan amount $225,000, interest rate 7%, Annual Percentage Rate (APR) 7.207%, final principal and interest payment $1,496.93.
10% down payment example for a 30-year fixed-rate Conventional loan: Total sales price $300,000, down payment $30,000, loan amount $270,000, interest rate 6.5%, Annual Percentage Rate (APR) 6.675%, final principal and interest payment $1,706.58.
3% down payment example for a 30-year fixed-rate Conventional loan: Total sales price $300,000, down payment $9,000, loan amount $291,000, interest rate 6.5%, Annual Percentage Rate (APR) 6.667%, final principal and interest payment $1,839.32.
3.5% down payment example for a 30-year fixed-rate FHA loan: Total sales price $300,000, down payment $10,500, loan amount $289,500, interest rate 6.5%, Annual Percentage Rate (APR) 6.667%, final principal and interest payment $1,829.84.
5% down payment example for a 30-year fixed-rate Conventional loan: Total sales price $300,000, down payment $15,000, loan amount $285,000, interest rate 6.5%, Annual Percentage Rate (APR) 6.668%, final principal and interest payment $1,801.39.
Taxes, insurance, and mortgage insurance will be part of the total mortgage payment but are not included in these examples. These examples are for illustrative purposes only and may differ from the current interest rates offered. Call for the current rate and full disclosure of current terms.
The information provided here is for informational purposes. When interest rates and loan program information are included, it is for illustration purposes only and not a solicitation or quote for services. This is not an advertisement or loan estimate. Current interest rates, loan programs and qualification criteria can change at any time. If you have questions or need assistance, we can be reached using the contact information above.
Union Home Mortgage Corp. does not provide tax, legal, credit repair, or accounting services. The information provided is generally true but may not apply to you or your situation. For tax or legal advice please consult an appropriate professional in one of these fields.
A conditional pre-approval letter is not an offer to lend, a commitment to make a loan, or a guarantee of specific rates or terms. It is not a formal written commitment to issue a loan. A formal loan commitment may only be issued once a property is identified, a formal application is submitted, and the loan has gone through underwriting and has been evaluated. At the time of final approval, your application must meet UHM’s lending standards, such as receipt of an acceptable appraisal and validation of credit, including information received from independent third parties regarding your credit history, and underwriting information. Your information has not been submitted to underwriting for evaluation and has not yet been approved.
About the author: This article was written by Luke Skar of MadisonMortgageGuys.com. As the Social Media Strategist, his role is to provide original content for all of their social media profiles as well as generate new leads from his website.
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