# How Much House Can I Afford Find Out

By simply crunching a few numbers, you can figure out how to buy a home that won’t bust your budget. Follow the steps below to determine how much house you can afford, and then go over the results with your spouse. You both need to be on the same page when it comes to your budget and what you can actually pay.

1. Add up any income you bring in each month.

Let’s say you bring home \$2,400 a month and your spouse makes \$2,600 a month. Your total monthly take-home pay would be \$5,000.

2. Multiply your monthly take-home pay by 25% to get your maximum mortgage payment.

If you earn \$5,000 a month, which means your monthly house payment should be no more than \$1,250. The calculator below will show you a ballpark figure for how much house you can afford based on your down payment amount and maximum house payment.

3. Use our mortgage calculator to determine your budget.

Sticking with our example of an income of \$5,000 a month, you could afford these options on a 15-year fixed-rate mortgage:

• \$187,767 home with a 10% down payment (\$18,777)
• \$211,238 home with a 20% down payment (\$42,248)
• \$241,415 home with a 30% down payment (\$72,424)
• \$281,650 home with a 40% down payment (\$112,660)

Remember though that this is an estimate. Don’t forget that property taxes and homeowner’s insurance will affect your monthly payment. Our mortgage calculator is an easy way to see how those costs will impact your home-buying budget.

For example, if you plug in a mortgage amount of \$211,238 with a 20% down payment, you’ll find that your maximum monthly payment of \$1,250 increases to \$1,515 when you add in \$194 for taxes and \$71 for insurance. To get that number back down to a monthly housing budget of \$1,250, you’ll need to lower the price of the house you can afford to \$172,600.

Use the calculator to try out other combinations to find the right mortgage amount, interest rate and down payment combo that will work for your budget.

4. Factor in homeownership costs.

Your emergency fund can cover major home disasters. But if you’ll be paying homeowner association fees or saving up for a few home upgrades, you’ll need to build room in your monthly budget for those expenses. Just be sure they don’t take away from bigger financial goals—like saving for retirement.

Be sure to figure homeownership expenses in your monthly budget. These costs may include:

• Utilities
• Ongoing maintenance and repairs
• Furniture and décor

Your down payment plays an essential role in determining how much home you can afford. The more cash you put down, the less money you’ll need to finance. That means lower mortgage payments each month and a faster timeline to pay off your home loan! Just imagine a home with zero payments!

The best way to buy a home is with 100% cash. But most people don’t want to postpone homeownership until they can pay cash. To get a better interest rate—and to keep from financing 100% of the cost of your home—you need to put at least 10% down. A 20% down payment is even better; when you put 20% down, you aren’t required to pay private mortgage insurance (PMI). PMI protects the mortgage company in the event you don’t make your payments and they have to take back the home (foreclose). It usually costs 1% of the total loan value and is added to your monthly payment.

PMI may change how much house you thought you could afford, so be sure to include it in your calculations if your down payment will be less than 20%. Or, you can adjust your total home price range so you can put down at least 20% in cash.