How Much Mortgage Can You Really Afford?
Before house hunting, you need to know your borrowing limit. Lenders typically approve a mortgage of 3-5x your annual income, but affordability depends on more than just salary.
The 28/36 Rule
Financial experts recommend the 28/36 rule: spend no more than 28% of gross monthly income on housing costs, and no more than 36% on total debt payments.
Mortgage Affordability Table
| Annual Income | Max Home Price (3.5x) | Monthly Payment (5%, 30yr) |
|---|---|---|
| $50,000 | $175,000 | $940 |
| $75,000 | $262,500 | $1,409 |
| $100,000 | $350,000 | $1,879 |
| $150,000 | $525,000 | $2,819 |
Factors That Affect Affordability
Down payment: 20% down avoids private mortgage insurance (PMI) and reduces monthly payments significantly. Even 10% makes a big difference.
Interest rate: A 1% difference on a $300,000 mortgage = $180/month or $64,800 over 30 years.
Other debts: Car loans, student loans, and credit card debt reduce your borrowing capacity. Pay these down before applying.
Credit score: 740+ gets you the best rates. Each 20-point drop can cost 0.25-0.5% more in interest.
Hidden Costs of Homeownership
Property tax (1-2% of home value annually), insurance ($1,000-3,000/year), maintenance (1% of home value), HOA fees, and utilities. Budget 30-35% above your mortgage payment for total housing costs.
Use our free mortgage calculator to find your exact affordability.