How Much House Can I Afford?

How Much House Can I Afford?

August 8th, 2018 | Purchasing a Home, Preapproval, Pre-qualification

When you are ready to buy a home, whether for the first time or the tenth, it is always important to know how much you can afford to spend. This will help you narrow your home search and ensure you do not get in over your head financially. There are several factors to consider when determining how much house you can afford.

Debt Ratios

Mortgage lenders will evaluate your debts relative to your income. The standard rule of thumb for debt-to-income ratios is 28/36. The first number means lenders prefer that your total housing debt- including your new mortgage, taxes, HOA fees, private mortgage insurance, etc. – is less than 28% of your total income. The second number refers to your total debt – mortgage, car loans, student loans, credit cards, etc. – which lenders prefer to be less than 36% of your income. Of course these ratios will vary slightly by lender, but the lower your ratios, the better your chances of finding funding and getting good interest rates.


How much you can afford for a house will also be determined by your credit history and FICO score. These factors will influence what type of mortgage you can qualify for and how low the interest rate will be. If your credit score is less-than-perfect, your mortgage interest rate will be higher, making your monthly payment higher and reducing how much you can actually spend on a house. If your credit profile is not as clean as you would like it to be right now, you can take steps to improve your FICO score before applying for a mortgage.

Down Payment

Almost all home loans require a down payment, even if it is just 3% of the purchase price. (There may be some exceptions in FHA and VA loans.) The more you have to contribute as a down payment, the more attractive you will be to sellers and the more attractive your loan options will be. A 20% down payment is ideal because with any less than that you will have to pay private mortgage insurance which pushes up your monthly payment and cuts down your home price budget.

Beyond coming up with these numbers, you should consider your lifestyle when it comes to how much you can afford. Buying a home can come with many hidden costs - repairing and replacing various parts and appliances, HOA dues, higher utilities, yard work, renovation – and those can eat into your budget for other things like entertainment or savings. It is important to set a house budget that will give you enough cushion to still be able to pay for not only the essentials of food and transportation, but also for your retirement goals, saving for kids’ college and vacation plans.

With some careful calculations on your own and possibly with the help of online tools, you can figure out how much home you can truly afford without stretching your resources too thin. When you buy a house within that budgeted price range, homeownership can be just as enjoyable as you have dreamed it would.

Do you want to find out how much house you can afford? If so, contact Holmgren and Associates at 510-339-2121 today and we can give you the answer over the phone.


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Holmgren and Associates

DBA of Finance of America
1900 Mountain Boulevard
Oakland, California 94611
Phone: 510-339-2121
NMLS 0910184/1071

Holmgren & Associates is a branch of Finance of America. We are a full service mortgage banker with an experienced staff offering expertise in residential mortgage lending, with primary focus on loans for home purchase, refinance, and reverse mortgages.

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©2019 Holmgren & Associates is a division of Finance of America Mortgage LLC |Equal Housing Opportunity | NMLS ID #1071 (| 300 Welsh Road, Building 5, Horsham, PA 19044 | (800) 355-5698 | Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act
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This is not a commitment to lend. Prices, guidelines and minimum requirements are subject to change without notice. Some products may not be available in all states.  Subject to review of credit and/or collateral; not all applicants will qualify for financing. It is important to make an informed decision when selecting and using a loan product; make sure to compare loan types when making a financing decision.  Any materials were not provided by HUD or FHA. It has not been approved by FHA or any Government Agency.  A preapproval is not a loan approval, rate lock, guarantee or commitment to lend. An underwriter must review and approve a complete loan application after you are preapproved in order to obtain financing.  Questions, comments, concerns? Send to