How Much House Can I Afford? Here’s How To Figure It Out

How Much House Can I Afford? Here’s How To Figure It Out

About the data

Debt-to-income thresholds in the calculator are based on interviews with mortgage brokers on what they generally see in the marketplace.

Exactly how much you qualify for will depend on your individual circumstances, including credit score, current interest rates and how much you’ll have in savings after you buy a home.

Credit scores in the calculator are used just to determine private mortgage insurance costs. But lenders use credit scores to set interest rates as well, so your rate may be higher or lower than shown here.

PMI costs are determined using a generic pricing sheet by Enact Mortgage Insurance. The industry often uses pricing more specific to a borrower’s situation, so your PMI costs could be higher or lower than shown here.

Homeowners insurance and property tax rates have been provided by Redfin, and are calculated at 0.22% and 1.25% a year respectively.

Home price on the map reflects typical value for homes in the 35th to 65th percentile range collected by Zillow as of Februay 2022.

What can I do today to be prepared?

If a home purchase isn’t in your immediate future, there are a few things you can do to better prepare far in advance.

  1. Pay down any debt When you pay down your debt, you decrease your debt-to-income ratio. This is a key input in determining the terms and interest rate for your mortgage. The rule of thumb is that your total monthly debt payments should be less than 33% of your monthly pre-tax income. See more details about mortgage.

  2. Improve your credit score Lenders use your credit score to assess the risk they take on when giving you a loan. They use it to determine whether you qualify for a mortgage and what interest rate you’ll pay. A healthy credit score is 740 or higher. To increase your score, monitor it via credit reports, set up bill payment reminders and pay down any debt. Source: My FICO

  3. Budget wisely This might seem like a no-brainer, but everyday expenses can get in the way of proactively saving for larger goals. By defining a monthly amount to put towards a home and depositing it in an appropriate savings or investment account, your future won’t become an afterthought. Learn more about how to invest home savings.

Time can be your friend. A longer time horizon means more time to save for your down payment and build up your credit score. However, just because you’re buying more time to save for a home purchase doesn’t mean you don’t have living expenses. Be sure to factor in rent and other household expenses into your savings plan.


How does location factor in?

Deciding where to buy is often almost as big of a decision as which home to buy. For those living in urban areas like New York or San Francisco, a fairly common question that arises is whether or not to make the move to the suburbs.

A huge draw of the suburbs is you can often get a larger home for the same budget. But, on the other hand, there are many perks and conveniences of city life that can’t be easily replaced when you move away.

Step 3: Project the costs of owning a home 

What does it cost to own and maintain a home? Your mortgage payment is the largest ongoing cost of homeownership. With most 30-year or 15-year conventional loans, homeowners will have a fixed-rate mortgage. This means a fixed monthly payment for the term of the loan. That amount will not change unless you refinance your terms with the lender. A longer mortgage term will often result in a lower monthly payment, and it will take longer to repay. A shorter mortgage term will involve a higher monthly payment and the home will be paid off sooner. 

For renters becoming homeowners, utility bills could bring sticker shock. As a homeowner, you can expect your utility bill to be almost four times higher than what you paid as a renter. Some renters even pay the landlord a flat fee for gas, electricity, sewer, and water. If you rent a house already, you may not see this as big of a change. As a homeowner, you pay for each service based on usage. For example, your water usage goes up when you take care of a lawn or garden. 

Homeowners need to pay property taxes and insurance. County property taxes commonly cover funding for local government, public schools, roads, emergency services, and libraries. Depending on where you live, your property tax rate will vary. You can look up property tax by county to include in your estimated homeownership costs.

Private Mortgage Insurance (PMI) pays the lender if you default on your mortgage. It applies to buyers whose down payment is less than 20%. You can typically expect your PMI payment to be between 0.5 – 1% of your loan amount per year. For example, on a $200,000 mortgage, your PMI payment would be $1,000 – $2,000 per year, or $83- $163 per month in addition to your mortgage. 

If you live in a community with a homeowners association (HOA), you will need to pay a monthly fee to the association. These fees typically cover property maintenance, amenities, and security. HOA fees range between $100-$1,000+ depending on the type of property and its location.

Your home will need repairs and renovations over time so you may want a home maintenance savings fund. A good rule of thumb is to save 1-4% of your home’s value for yearly maintenance and home improvements. Such as, for a $200,000 home, the homeowner should save between $2,000-$8,000 a year for maintenance or significant home improvements. 

Earnest money

Also known as a Good Faith Deposit, in most areas the buyer pays an earnest money deposit within three days of the seller accepting their offer.

Earnest money is typically 1%–3% of the final sale price, and is applied to the purchase price of your home.

Earnest money is held in reserve, either by an escrow firm or attorney, until the closing process is completed or cancelled.

  • Successful sale: your earnest money is applied to your down payment.
  • Unsuccessful sale due to a failed contingency: you get 100% of your earnest money back.
  • Unsuccessful sale not covered by a contingency: if you simply back out or fail to close, the seller keeps 100% of your earnest money.
Redfin Agent Tip

Consider increasing your earnest money to make a stronger offer. Also keep in mind, cashier's checks or wire transfers are the preferred methods of depositing earnest money. We don’t recommend using your credit card because it could negatively impact your credit score, which can hurt your chances of getting your mortgage loan.


A home appraisal is a professional estimate of a home’s value, and usually costs $300 to $500. Your bank will require the official home appraisal to make sure the home you’re purchasing is worth what they have committed to lending you. Your home appraisal may also determine your property tax amount. If you pay for the home appraisal when it’s performed, it will not be included as part of your closing costs.

About the Author

Brittney Myers

Brittney is a credit expert and card strategist whose advice has been featured by major publications and financial sites across the web. A spreadsheet and data obsessive, she believes most problems can be solved with the right research, and she specializes in translating complex topics to educate and empower readers.


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