With rent prices on the rise, this is a hot topic for many. Financial experts may offer differing opinions, but in the end, what truly matters is what the bank is willing to lend—and what you can realistically manage, both on paper and in real life.
When you rent, many expenses like maintenance and landscaping are included. As a homeowner, you're responsible for those costs—but you’re also building equity in your property.
Determining how much house you can afford isn’t as simple as calculating a percentage of your income. Most banks and mortgage lenders look at multiple factors:
✔ Value of the home compared to your salary
✔ Percentage of income going toward mortgage payments
✔ Total percentage of income spent on debt
Related Link: Can I Buy a Home with No Money Down?
Your mortgage isn’t just the loan principal. A typical monthly mortgage payment includes:
✔ Principal – The remaining balance on your home loan
✔ Interest – The cost of borrowing money
✔ Property taxes – Paid to your local government
✔ Homeowners insurance – Often bundled with your mortgage
✔ Private mortgage insurance (PMI) – May apply if you put less than 20% down
You can estimate your full mortgage costs with a mortgage calculator.
Lenders often approve mortgages that total 2 to 2.5 times your gross annual income. However, your credit score, existing debt, and financial history can shift this range.
Related Link: What You Should Know About Financing with a HARP Mortgage
Lenders use two key ratios:
Let’s talk about your specific goals. Contact the “loan brothers” at Mares Mortgage today.
While lenders use formulas, you should factor in personal lifestyle choices. Even if you're approved for a certain amount, will it fit your lifestyle?
Related Link: 580 Credit Score Home Loans
Do you like to travel, dine out, or splurge on hobbies? Will a larger mortgage limit your ability to do those things? Or would you rather go for a smaller home and enjoy more financial freedom?
Some people prefer minimal debt and quick repayment. Others are comfortable carrying high balances or buying at the top of their budget. Your comfort level with debt is key in determining how much home you can afford.
Financial goals vary. Some families prioritize saving for college; others prefer investing more in real estate. It’s all about finding the right balance between what you can afford and what you’re comfortable affording.
Even if a lender approves you for a certain amount, it may leave you house poor—owning a beautiful home but lacking the financial flexibility to enjoy life.
When figuring out how much of your income should go toward a mortgage, consider these guidelines:
✔ Stay under 28% of gross income for mortgage payments
✔ Keep total debt under 36% of gross income
✔ Aim for a home that costs about 2x your annual income
Try to target the low end of your price range. That way, if your dream home comes along and stretches your budget slightly, you’ll have some flexibility.
Buying a home should empower your life, not restrict it. Avoid getting trapped in a mortgage that limits your lifestyle.
Ready to start shopping? Get pre-qualified with Mares Mortgage today and see where you stand.
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