Frequently Asked Questions
What percentage of income should go to housing?
The 28/36 rule suggests spending no more than 28% of gross income on housing and 36% on total debt. Some lenders allow up to 43% or even 50% for FHA loans with compensating factors. Consider your comfort level—being "house poor" isn't enjoyable.
Does a bigger down payment help?
Absolutely. Larger down payments reduce your loan amount, lower monthly payments, eliminate PMI (with 20%+ down), and may get you better interest rates. Every extra dollar down increases your buying power and reduces long-term costs.
How do interest rates affect affordability?
Higher rates reduce buying power significantly. At 6% rate vs 7%, you can afford roughly 10-15% more house for the same payment. Even 1% rate change affects monthly payments by $100-200+ on typical mortgages. Shop multiple lenders for best rates.
Should I include my spouse's income?
Yes, if both will be on the loan. Combined incomes increase qualification amount. However, both credit scores matter too. If one has poor credit, you might get better terms with just the higher-score borrower (if income suffices).
What if I have variable income?
Lenders typically average 2 years of variable income (commission, self-employment, bonuses). If declining, they may use lower amount. Stable base salary helps. Document everything with tax returns and 1099s. Some lenders offer bank statement loans for self-employed.
Are property taxes included in affordability?
Yes, this calculator includes estimated property taxes and insurance in the monthly payment. High-tax areas significantly reduce affordability. Check actual rates for areas you're considering—some states have much higher property taxes than others.
Can I afford a house while paying student loans?
Yes, but student loans count in your DTI. Income-based repayment plans may help lower monthly debt count. Some lenders use actual payment, others use 1% of balance. FHA recently changed to make it easier for student loan borrowers to qualify.
What's better: more house or lower payment?
Depends on your priorities. More house may appreciate more, but lower payment gives cash flow flexibility. Consider lifestyle, savings goals, job stability, and how long you'll stay. Don't sacrifice emergency fund or retirement savings for a bigger house.
Does car payment affect home affordability?
Yes, all monthly debts affect DTI. A $500 car payment reduces your mortgage qualification by roughly $75,000-100,000. Pay off cars before house hunting if possible, or buy house first then car. Every $100 in monthly debt reduces buying power significantly.
How accurate is this calculator?
This provides a solid estimate based on standard DTI ratios. Actual qualification depends on lender, credit score, specific loan program, and full financial picture. Get pre-approved with a lender for exact numbers. Use this as a starting point for budgeting.
Should I wait to buy if I can't afford much?
Consider waiting if you'd be stretched thin, if you need to save more down payment, or if your income is likely to increase. But also consider rising home prices and interest rates—waiting costs too. Run numbers both ways. Starter homes are okay—you can upgrade later.
What about condos and townhomes?
Often more affordable than single-family homes. Factor in HOA fees (counted in DTI) and special assessments. Condos may have stricter lending requirements. Calculate total monthly cost including HOA when comparing to houses. Sometimes the savings make sense.