One of the biggest questions first-time buyers ask is: “How much home can I really afford?” It’s a smart question, because knowing your budget before you start house-hunting can save you time, stress, and disappointment.
Here’s a quick formula you can use to estimate your home affordability:
Step 1: Find Your Monthly Income
Take your total annual income and divide it by 12. This gives you your gross monthly income.
Step 2: Calculate Your Maximum Allowable Debt
Multiply that monthly income by 0.45 (or 45%). This number is the most lenders typically allow for all your monthly debts combined, including your future mortgage payment.
Step 3: Subtract Your Existing Debt
List out your minimum monthly debt payments (things like student loans, car payments, and credit card minimums). Subtract those from the number you calculated in Step 2.
Step 4: See Your Maximum Mortgage Payment
The remaining amount is the maximum house payment (mortgage + taxes + insurance) you may qualify for.
Example:
If your annual income is $72,000:
- $72,000 ÷ 12 = $6,000/month income
- $6,000 × 0.45 = $2,700 allowable debt
- If you already pay $700 in car/student loan/credit cards → $2,700 – $700 = $2,000 max house payment
What to Do Next
If that number feels realistic for your area, it’s time to connect with a Mortgage Advisor and see what homes you can actually qualify for.
If the number seems too low, don’t worry you have options:
✅ Increase your income
✅ Lower your debt
✅ Consider applying with a co-signer
💡 Pro Tip: Remember, this formula is just an estimate. Every lender may have slightly different requirements, and factors like your credit score, down payment, and loan program also play a role.
The first step to homeownership is understanding your numbers. Once you know your budget, you can shop confidently for homes that fit your lifestyle and your finances.
bricallis.blog 