The size of the mortgage you can afford depends on many factors, mainly on your income, monthly debts, credit profile, and the size of your down payment.
Many lenders recommend that your monthly housing costs stay around 28–30% of your gross income and no more than about 36–43% of your total debt obligations.
Still, the exact numbers can vary widely based on your situation.
In this guide, we will walk you through the key factors that determine your borrowing power and show you how much mortgage you can afford before you start house hunting.
How Large a Mortgage Can I Afford?
Based on Zillow data, the following table shows the mortgage amount you may be able to afford. The main factor is your income. It is your salary before taxes and other deductions are taken out of your paycheck.
To answer your question, “How much mortgage could I afford?” and determine how large a mortgage you can afford, your total monthly costs, including mortgage, property taxes, and insurance, should not exceed 30% of your gross monthly income.
The amount shown in this table is only a general estimate. Your mortgage amount is based on the specific metro area, loan terms, and down payment.
| Salary | Gross monthly income | Down Payment | House affordability |
| $90K | $7,500 | $13,500 | $245,983 |
| $100K | $8,333 | $15,000 | $277,742 |
| $200K | $16,666 | $30,000 | $630,709 |
| $300K | $25,000 | $45,000 | $986,203 |
| $400K | $33,333 | $60,000 | $1,341,697 |
| $500K | $41,666 | $75,000 | $1,697,190 |
| $600K | $50,000 | $90,000 | $2,052,684 |
| $700K | $58,333 | $105,000 | $2,408,178 |
| $800K | $66,666 | $120,000 | $2,763,671 |
| $900K | $75,000 | $135,000 | $3,119,165 |
Call Mortgage Shop today for a more accurate assessment of how large a mortgage you can afford:
800-816-7982
Key Factors That Determine How Much Mortgage You Can Afford
Annual income
Annual income is the amount of money you earn in a year before taxes and deductions. You can find this amount on your W‑2 form. Remember that if you have a co-borrower who is contributing to the mortgage, you must combine both incomes to get your total annual income.
If you are self-employed or a freelancer, lenders usually calculate your average income over the past 2 years.
Total monthly debts
These are your other monthly expenses, such as:
- Car loans
- Student loans
- Credit card minimums
- Personal loans
- Child support/alimony.
For example, if you pay $300 on your car loan and $100 on your minimum credit card payment, your monthly debt would be $400.
Down payment
The amount of money you pay upfront to purchase a property is the down payment. You must make a minimum 3% down payment. If you want to lower your monthly payment and improve your chances of approval, a 20% down payment is ideal.
Also, the size of your down payment affects:
- How large a loan do you need
- Whether you must pay PMI (if under 20%)
- Your interest rate
- Your monthly payment
Your Credit Score and Credit History
Your credit score shows lenders how reliable you are and how likely you are to repay money. This factor helps determine the interest rate and loan type you qualify for.
It affects your monthly payment. Look at this example:
- Credit score Excellent (760+) = interest rate 6.5% and monthly payment of $2,528
- Credit score Fair (640) = interest rate 7.8 and monthly payment of $2,886
Debt-to-income ratio (DTI)
Your DTI is the total of your monthly debt payments.
The formula is:
DTI = (Total Monthly Debt Payments + Estimated Mortgage Payment) / Gross Monthly Income
Using your DTI, lenders measure your ability to manage monthly payments and repay debt. For good affordability, it’s better to keep your DTI at or below 36%.
Current Mortgage Interest Rates
The interest rate is the amount that a lender charges a borrower for taking out a loan. Usually, it is expressed as an annual percentage of the loan balance.
You pay your loan with interest monthly until it is paid in full. It also varies based on factors such as your down payment and credit score.
Lower rate = lower payment = larger mortgage you can afford.
Keep in mind that Rates fluctuate daily based on the economy and your personal credit profile. You can check today’s interest rates here:
https://mortgage.shop/todays-rates/
Loan term
Typical loan terms are 30 years and 15 years. Shorter terms result in higher monthly payments but much lower total interest.
There are different terms you can choose depending on the type of your loan and your situation.
Property tax
When you buy a home, you must pay annual property taxes. It is based on the property’s assessed value. It can affect your affordability.
Property taxes vary by location, state, county, and municipality, and are included in your monthly mortgage payment. Higher taxes reduce the amount of home you can afford.
Homeowner’s insurance (HOI)
The HOI is a type of property insurance that covers your private residence. It is usually required to get a mortgage.
The cost depends on the following factors:
- your location
- type of coverage
- any discounts you qualify for
- your insurance provider
Usually, you may pay about 35$ per month for about 100,000 of the home’s value.
Private mortgage insurance (PMI)
If you, as a borrower, contribute less than a 20% down payment on a home purchase, many lenders require private mortgage insurance.
It protects the lender against losses that may arise if you default on a mortgage loan. PMI increases your monthly payment until you reach 20% equity.
Homeowner’s Association (HOA) dues
If the home is in an HOA community, monthly dues are included in your debt calculations. An HOA governs some condominiums or townhomes. Any HOA you pay each month can affect your affordability.
The 28/36 Rule for Mortgage Affordability
The 28/36 rule is a guideline lenders use to decide how much house you can afford based on your income and debts.
The 28% housing rule states that your monthly housing costs should not exceed 28% of your gross monthly income.
For instance, suppose your gross monthly income is $6,000.
28% housing limit: 6000×0.28=1680
It means you should spend no more than $1,680/month on housing.
Housing costs include:
- Mortgage payment (principal + interest)
- Property taxes
- Homeowner’s insurance
- PMI (if required)
- HOA fees (if any)
The 36% Rule, or Total Debt Ratio, states that your total monthly debt payments should not exceed 36% of your gross monthly income.
Total debts include:
- Housing costs
- Car loans
- Student loans
- Credit card payments
- Personal loans
- Other required debt payments
For example, suppose your gross monthly income is $6,000.
36% total debt limit:
6000 × 0.36 = 2160
It means all your debts combined should be no more than $2,160/month.
If you already pay:
- Car loan: $300
- Student loan: $200
Total other debts = $500
Maximum housing payment allowed:
2160−500=1660
So your affordable mortgage payment is about $1,660/month.
Most affordable markets for homebuyers
Based on recent Zillow analysis, several U.S cities stand out as the most affordable markets for homebuyers. You can find lower home prices and relatively manageable mortgage burdens in these cities.
The following table highlights ten of the most affordable housing markets:
| Pittsburgh, PA | 24% | $208,583 |
| St. Louis, MO | 27% | $205,141 |
| Indianapolis, IN | 27% | $275,639 |
| Birmingham, AL | 27% | $247,509 |
| Oklahoma City, OK | 28% | $230,466 |
| Cincinnati, OH | 28% | $281,887 |
| Detroit, MI | 28% | $248,126 |
| Cleveland, OH | 29% | $228,140 |
| Louisville, KY | 29% | $255,206 |
| Memphis, TN | 30% | $233,885 |
