When buying a home Alabama, Florida, Georgia, Maryland, N. Carolina, S. Carolina, Tennessee or Virginia, it’s important to know how much you can afford. A home affordability calculator can help you estimate your monthly mortgage payment, but it doesn’t factor other in goals like family planning and retirement. To determine what you really should spend on your monthly mortgage, versus what you can technically afford, there are some standard factors to consider.
 

1. Calculate your total debt. 

   Your debt-to-income ratio is a calculation used by lenders to determine how much of your monthly income is already owed to someone. This figure can include student loans, child support or alimony, auto loans, and the minimum owed on your credit cards. A good rule of thumb is to pay down these other debts before taking on more debt. 



2. Try to spend less than 30% of your gross income on your home. 

   A standard rule that lenders use as a criterion is not allowing people to spend more than 30% of their gross income on their mortgage. You may have heard the term “house poor.” Housing ratio or front-end ratio is when more than 28% of your income goes toward housing costs (principal, interest, taxes and insurance). Even with a gorgeous home, living paycheck to paycheck could mean little left for future, savings, or entertaining.



3. Don’t forget about your home’s down payment cost.

   Another factor to consider when buying a new home is the cost of your down payment. For those taking advantage of an FHA or VA mortgage, you may only need to put down between 3% and 5% of your home’s purchase price. However, that will add an additional cost of private mortgage insurance (PMI). Most other mortgages require a 20% down payment of the home’s purchase price. It’s a good idea to start saving up for your down payment long before you begin house shopping. 



4. Know what you’re getting into with upkeep. 

   When looking at houses, you may get excited by the thought of having your own pool or the big backyard of your dreams. Just remember that these types of items can cost a lot in maintenance over the years. Depending on your climate and landscape, upkeep may include leaf or snow removal, tree trimming, gardening and overall lawn care. A pool adds even more costs, such as supplies, maintenance, and increased insurance.



5.  Failing to plan means planning to fail. 

   Another way to look at how much home you can afford is to figure out your long-term lifestyle and plan accordingly. Do you hope to have a family and children someday? Do you love to travel or go out on the weekends? How much do you want in retirement savings? Factor in those additional costs and see if you can still swing it. These factors often aren’t included in financial calculators or bank’s checklists, so it’s important to account for them when creating your monthly housing budget. 



6. Expect the unexpected.

   A common homeowner tip is to make sure you save enough money in an emergency fund for unexpected repairs and save for a rainy day. While a home inspection may catch big issues, surprises happen, like a broken furnace or a roof replacement. This is why it’s important to be financially prepared.

Ready to figure out how much home you can afford? Tap into our mortgage resource center or chat with one of our local mortgage bankers. 
 

Reviewed April 2025
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.