Affordability Calculator

# How much house can I afford?

## Consider buying in the near future? Use this calculator to find out more.

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# Understanding How Much House I Can Afford

Purchasing a home within your financial means can ensure you won’t fall behind on expensive monthly mortgage payments. Several factors influence your budget, and a home affordability calculator can help you easily see how much you can spend based on your income and expenses.
RealtyHop Affordability Calculator
The RealtyHop Affordability calculator considers your budget for homeownership to determine an ideal purchase price. Input your location, then consider how much you can afford to spend on your monthly mortgage payment and input that amount into the calculator and your desired room size.
The calculator showcases how much you can spend on a property and recommends listings at that price point. If you’d like to refine the results further, you can select if you’d like the recommended properties to have amenities like a door attendant, elevator, or in-unit laundry.

Housing experts agree that homeowners should direct no more than 28% of their income toward housing costs, and no more than 36% toward all debts, like car and student loan payments. The 28/36 rule provides general guidance to help potential buyers understand where their money should go monthly.
For example, a potential homebuyer who earns \$5,000 monthly and who follows the 28/36 rule can afford to spend up to \$1,400 on housing (28% of \$5,000) and up to \$1,800 (36% of \$5,000) on total debts. The homeowner can then budget the remaining \$1,800 for other costs like savings, food, and leisure expenses.
The amount of debt that potential buyer has can influence the amount they can budget for homeownership costs. That same buyer with a monthly income of \$5,000 may be unable to afford to spend \$1,400 a month on housing if their other debts exceed \$400 monthly. If the buyer has to spend \$600 a month on car and student loan payments, their housing budget reduces to \$1,200 so they still only spend \$1,800 monthly on total debts. Buyers with larger debt obligations can work to pay down their outstanding balances before starting their home search process.

# What Factors Influence Affordability?

Homebuyers must consider their current financial situation to determine how much they can afford to spend on a home. Several factors influence how much a buyer can afford to spend on a home, and mortgage lenders will review this information to approve or deny a mortgage loan application. Potential homebuyers should consider the following factors to determine if they can afford a house:
Debt-to-income ratio (DTI)
Similar to the 28/36 rule, mortgage lenders consider a prospective borrower’s debt-to-income ratio (DTI) to ensure they maintain a healthy balance of anticipated housing costs to other outstanding debt payments. Lenders typically allow a DTI of up to 43% but generally seek those at or below 28%.
To determine your DTI, divide your monthly debts by your monthly pre-tax income. For example, if you have monthly debt payments of \$1,300 and a monthly income of \$5,000, your DTI is 26% (\$1,300/\$5,000).
Each lender has their limits for DTI, but borrowers should still try to lower their DTI as much as possible. Decreasing debt by paying off credit cards or other loans can lower your DTI. Additionally, generating a higher income will also help decrease a borrower’s DTI.
Down Payment
A down payment is a large sum of money that a homebuyer will pay at the time they acquire the home. The down payment is a large financial sum, and mortgage lenders typically look for buyers to submit a down payment equal to 20% of the purchase price when they close on the house. The buyer will then pay for the remaining balance in monthly mortgage payments.
Here are some examples to illustrate how a down payment can affect your monthly cost:
A prospective buyer can afford to spend \$1,500 per month on housing costs. If they’re interested in a home that costs \$325,000, the following chart explains how the amount they spend on their down payment affects their monthly mortgage payments on a 30-year conventional loan with a 5.5% interest rate:
Budget
\$1,500
\$1,500
Purchase Price
\$325,000
\$325,000
Down Payment %
20%
20%
Down Payment Amount
\$65,000
\$32,500
Remaining Principal
\$260,000
\$292,500
Monthly Mortgage Payment
\$1,476.25
\$1,660.78
The buyer will have to put down more than 10% for a down payment if they wish to purchase a home for \$325,000 and spend under \$1,500 each month. If they cannot afford a higher down payment, they must then lower their housing budget to ensure they can pay their monthly mortgage payments.
Prospective buyers can use a Mortgage Payment Calculator to further understand their potential monthly payments based on their home purchase price, down payment, and mortgage interest rates.
Generally, buyers should aim to pay a down payment that equals 20% or more of the purchase price of the home, but some mortgage lenders will accept down payments as low as 3%.
Borrowers who pay less than 20% on their down payment must also pay for Private Mortgage Insurance (PMI) as part of their monthly mortgage payments.
Mortgage Interest Rates
Borrowers will have to pay both principal and interest in their monthly mortgage payments. Interest rates fluctuate and can influence a prospective borrower’s total budget; the higher the  rate, the more interest and less principal the borrower can afford to pay off each month, decreasing the amount they can afford to spend on a home.
Let’s say a buyer who can spend \$1,500 monthly on their mortgage secures a mortgage interest rate of 3.5%. If they pay a down payment of \$84,000, that buyer can afford a home with a purchase price of \$420,000.
However, that same buyer with a mortgage rate of 6.0% will have to spend more money on interest when paying back their loan. Therefore, if they still put \$84,000 toward a down payment, they can only afford a home worth \$335,000.
Interest rates drastically increased from 2021 to 2022, going from historic lows below 3.00% to highs of over 7.00%. Prospective buyers who wished to purchase property in 2022 had less spending power than if they purchased a property in 2021. In 2023, interest rates still remain high for borrowers, fluctuating around 6.0% for a 30-year conventional loan. Those who wish to purchase property must factor higher interest rates into their monthly payments. If mortgage interest rates decrease in the future, homeowners can refinance to secure a lower interest rate.
Credit Score
Mortgage lenders consider a buyer’s credit score during the loan approval process. Borrowers with higher scores can secure lower interest rates, which can, in turn, increase a homebuyer’s budget. Most mortgage lenders look for credit scores of at least 620 to qualify for a conventional loan.
Salary
The amount of income you generate directly affects how much you can afford to spend on a home. Increasing your salary will decrease your DTI and increase a mortgage lender’s chance of approving your application.
We can again use the 28/36 rule to understand how far a salary can stretch regarding home affordability. A prospective buyer with a salary of \$100,000 can spend \$28,000 a year, or \$2,333 monthly, on housing costs. They can therefore afford a home worth \$515,000 if they put 20% down and secure an interest rate of 5.5% on a 30-year conventional loan.

# How Does the Type of Home Loan Impact Affordability?

Various loans offer different purchasing options for buyers, impacting how much home they can afford. While a conventional loan with a 30-year term and 20% down payment is the most common financing option, other loans may be more appealing to some borrowers.
FHA Loans
Homebuyers who cannot afford a 20% down payment and who have credit scores below 620 can find other financing options through Federal Housing Administration (FHA) loans. With an FHA loan, potential borrowers with credit scores of at least 580 can put down only 3.5%  to secure a home.
FHA loans can help borrowers purchase property quickly by reducing the barrier to homeownership and requiring lower down payments. However, a smaller down payment increases the principal that buyers must repay in monthly payments. Additionally, FHA loans have higher closing costs, and borrowers must account for the added expenses when budgeting.
USDA Loans
The United States Department of Agriculture provides mortgage assistance options for those looking to purchase property in rural areas (USDA loan). Low to moderate-income buyers in rural areas can use the USDA program to purchase a property without a down payment. The program specifically works to help prospective homebuyers who cannot purchase a property through other financing options.
There is no minimum credit score requirement, but borrowers with scores of at least 640 can streamline the process and avoid additional underwriting. USDA loan borrowers must meet the following requirements:
• They have to be without safe, sanitary housing,
• They must be unable to secure home loans from traditional sources;
• They have to be below the income threshold for their area.
VA Loans
The United States Department of Veterans Affairs helps veterans or their spouses purchase a property (VA loans). There are various types of VA loans that offer borrowers different benefits, like no down payment requirement or lower interest rates.
Borrowers can qualify for VA loans by either serving 181 days during peacetime or 90 consecutive days during wartime. If a borrower served with the National Guard or Reserves for six years or spent 90 days under Title 32, they also qualify for VA loans. Spouses of deceased veterans can also qualify for VA loans if they meet certain requirements.

# How Much Home Can I Afford as a First-Time Homebuyer?

First-time homebuyers often have a tough time saving up for a down payment, however, there are other financing options available through first-time homebuyer programs. States, cities, towns, and other communities provide first-time homebuyer programs with lower down payment requirements, interest rates, and other perks that make homeownership more affordable. These programs come with their own sets of requirements and cater to different groups.
Buyers looking to renovate a home, purchase property in a specific area, or those that recently graduated from college may all be eligible for specific first-time homebuyer programs. They can also use programs to help offset purchasing closing costs, increasing the amount of money they can spend on their actual home.