How Much House Can You Afford?
Buying a home is probably the biggest financial decision you'll ever make. Before you start browsing listings, you need one number: how much house can you actually afford?
Our free Loan Calculator does the math instantly — enter your loan amount, interest rate, and term, and it shows you exactly what your monthly payment will be, plus total interest paid over the life of the loan.
The Two-Part Answer to "How Much Can I Afford?"
Part 1: Your Monthly Payment
The most immediate question is: what will you pay each month? This depends on:
- Loan amount — The home price minus your down payment
- Interest rate — Your rate (shop around; even 0.5% difference matters enormously)
- Loan term — Typically 30 years or 15 years
Part 2: Your Total Budget
Lenders generally follow the 28/36 rule:
- Your mortgage payment should not exceed 28% of your gross monthly income
- Your total debt payments (mortgage + car + student loans) should not exceed 36%
If you earn $6,000/month before taxes, a healthy mortgage payment is under $1,680/month.
Mortgage Payment Formula
The monthly payment formula looks intimidating but the Loan Calculator handles it for you:
`
M = P × [r(1+r)^n] ÷ [(1+r)^n - 1]
`
Where:
- M = monthly payment
- P = principal (loan amount)
- r = monthly interest rate (annual rate ÷ 12)
- n = number of payments (years × 12)
Example: $300,000 loan at 7% interest for 30 years
- Monthly rate: 7% ÷ 12 = 0.5833%
- Monthly payment: $1,996
- Total paid over 30 years: $718,560
- Total interest paid: $418,560
That last number is why the interest rate matters so much.
How Interest Rate Affects Your Monthly Payment
| Home Price | Down Payment | Loan Amount | Rate | Monthly Payment | Total Interest | |---|---|---|---|---|---| | $300,000 | $60,000 (20%) | $240,000 | 6.0% | $1,439 | $278,040 | | $300,000 | $60,000 (20%) | $240,000 | 7.0% | $1,597 | $334,920 | | $300,000 | $60,000 (20%) | $240,000 | 7.5% | $1,678 | $364,080 | | $300,000 | $30,000 (10%) | $270,000 | 7.0% | $1,797 | $376,920 |
A 1% difference in interest rate on a $240,000 loan costs you over $56,000 over 30 years. Improving your credit score before buying can literally save you tens of thousands of dollars.
The Full Cost of Homeownership (Beyond the Mortgage)
Your monthly mortgage payment is not your only housing cost. Budget for:
- Property taxes — Typically 1–2% of home value per year (varies by state and county)
- Homeowners insurance — Usually $1,000–$2,500/year
- PMI (Private Mortgage Insurance) — Required if your down payment is less than 20%; usually 0.5–1.5% of the loan annually
- HOA fees — If applicable, can range from $50 to $1,000+/month
- Maintenance — Budget 1–2% of home value per year for repairs
A $300,000 home with a $1,600/month mortgage payment might actually cost you $2,100–$2,300/month when you include all the above.
How to Use the Mortgage Calculator
1. Open our Loan Calculator 2. Enter the loan amount (home price minus down payment) 3. Enter the interest rate (check current rates from lenders or bankrate.com) 4. Enter the loan term (30 years = 360 months, 15 years = 180 months) 5. Hit Calculate — see your monthly payment and total interest instantly
Try different scenarios: what if you put 20% down instead of 10%? What if rates drop by 0.5%? The calculator makes it easy to compare.
30-Year vs. 15-Year Mortgage — Which Is Better?
| Feature | 30-Year Mortgage | 15-Year Mortgage | |---|---|---| | Monthly payment | Lower | Higher (but you own it faster) | | Total interest paid | Much higher | Much lower | | Flexibility | More (lower required payment) | Less | | Build equity | Slower | Faster | | Interest rate | Typically higher | Typically 0.5–1% lower |
Rule of thumb: A 15-year mortgage saves a huge amount in interest but requires a significantly higher monthly payment. If you can comfortably afford the higher payment, the 15-year saves money long-term. If cash flow is tight, a 30-year gives you breathing room.
How to Improve Your Affordability
If the numbers feel tight, here are real levers you can pull:
- Improve your credit score — A score of 760+ typically gets the best rates. Pay down credit card balances and fix any errors on your report.
- Increase your down payment — More down = smaller loan = lower payment (and no PMI if you reach 20%)
- Extend your loan term — A 30-year loan has a lower payment than a 20-year or 15-year
- Shop multiple lenders — Mortgage rates vary significantly between lenders. Get at least 3 quotes.
- Buy in a lower-tax area — Property taxes can add hundreds per month; consider this when comparing locations
Frequently Asked Questions
How much should I put down on a house? 20% is the traditional recommendation because it eliminates PMI and gives you immediate equity. But many people buy with 5–10% down, especially first-time buyers. The tradeoff is higher monthly payments and added PMI costs. Use our Loan Calculator to compare scenarios with different down payment amounts.
What credit score do I need to get a mortgage? Conventional loans typically require a credit score of at least 620. FHA loans allow scores as low as 580 (with 3.5% down). However, the best interest rates go to borrowers with scores of 740 or higher. Each 20-point improvement in your credit score can meaningfully improve your rate.
How much can I borrow based on my income? A common guideline is that your mortgage should not exceed 3–4 times your annual gross income. On a $80,000 salary, that's roughly $240,000–$320,000. But lenders will also look at your debt-to-income ratio, credit score, and savings. These are starting estimates, not hard limits.
Should I get pre-approved before looking at houses? Yes, always. A pre-approval letter from a lender tells you exactly how much you can borrow at what rate. It also makes your offers more competitive in a hot market. Sellers take pre-approved buyers much more seriously than buyers who are still figuring out their budget.