How much of a home can I afford?
Determining your home buying budget.Determining your home buying budget.
The first rule of home buying is to never buy too big (or expensive) of a house than you can comfortably afford. You don't want to lose sleep wondering whether or not you'll be able to make your next mortgage payment. It's always best to be prepared rather than surprised.
Here are some guidelines to consider:
- Aim for between 30-35% of your gross monthly income to pay for housing costs - including your mortgage payment, property taxes, homeowners insurance, and association fees (if any).
- Try to keep your total debt payments below 35-40% of your gross monthly income - including housing costs as noted above, PLUS auto loan, student loan, other personal loans, and minimum credit card payments.
If you have a lot of debt, you won't be able to afford as much in mortgage payments.
- Take your down payment into account. Making a down payment of at least 10 percent, and up to 20 percent, is ideal. If you put less than 20 percent down, your mortgage lender will require you to pay private mortgage insurance (PMI), which should be considered when figuring out how much of a home you can afford. Learn about our low down payment program.
Before you start home shopping, make sure you know your home buying budget and the absolute maximum amount you're willing to spend - and stick to it. Don't let anyone talk you into spending more, and you'll be a happy homeowner.
Not all applicants will qualify for financing. Mortgage rates and terms are subject to change without notice. Equal Housing Lender. All loans are offered by CIT Bank, N.A.