Mortgage affordability calculator: What house can I afford?

Table Of Content

• Get Accurate, Real-Time Rates With Rocket Mortgage®
• Major Factors that Influence Mortgage Eligibility
• Mortgage Rates & Loans
• The Bottom Line: A Mortgage Calculator Can Help You Determine How Much House You Can Afford
• How much house can I afford?
• Get prequalified for a more confident estimate
• How does where I live impact how much house I can afford?
• What can you afford to spend on a house? Try our SoCal-specific calculator.

Your loan will surely be paid within 30 years as long as you pay as scheduled. As a home buyer, you’ll want to have a certain level of comfort in understanding your monthly mortgage payments. So, let’s say this couple takes out a 30-year, fixed-rate mortgage at 7% for a $700,000 house, and makes a down payment of $140,000. Not taking into account taxes and insurance, their monthly mortgage payment on $700K would be approximately $3,726. Spend some time thinking about how much money you can afford to spend on your monthly mortgage payments. From there, you can test out different loan terms to see which one is the most manageable for your current income.

Get Accurate, Real-Time Rates With Rocket Mortgage®

"These conditions were especially favorable for the wealthiest of Americans, who experienced dramatic income increases, especially considering the fact that many companies saw record profits." The latter year represents the most recent household income data from the U.S. Sign up for CNBC's new online course How to Earn Passive Income Online to learn about common passive income streams, tips to get started and real-life success stories. Below, our experts have summarized what you’ll likely have to provide when working through mortgage qualification for a $700,000 home. Data for the fourth quarter of 2023 published by the National Association of Realtors found just 14 metro areas where the median sale price for an existing single-family home exceeded $700,000. The list featured eight metros in California, including San Jose, San Francisco and San Diego.

Major Factors that Influence Mortgage Eligibility

To determine which mortgage term is right for you, consider how much you can afford to pay each month and how quickly you prefer to have your mortgage paid off. A mortgage term is the period when a mortgage is amortized—stated another way, it’s the length of time you have to pay off your mortgage. The most common mortgage terms are 15 and 30 years, though other terms also exist and may even range up to 40 years. The length of your mortgage terms dictates (in part) how much you’ll pay each month—the longer your term, the lower your monthly payment. Keep in mind, however, that just because you can afford a house on paper doesn’t mean your budget can actually handle the payments. Beyond the factors your bank considers when pre-approving you for a mortgage amount, consider how much money you’ll have on-hand after you make the down payment.

Mortgage Rates & Loans

Before buying a house, be sure to give yourself enough time to save for a down payment. While the amount depends on your budget, the home’s price, and the type of loan you have, most financial advisers recommend saving for a 20% down payment. This is a sizeable amount, which is more expensive if your home’s value is higher.

The mortgage pre-qualifying process is an informal assessment of your ability to repay a loan. This provides you a ballpark estimate of how much you can borrow from a lender. It also gives you an overall picture of whether you satisfy minimum requirements for a mortgage. Meanwhile, the pre-approval process is based on documents that are verified by your lender.

How much house can I afford?

Washington – Today, April 22, as the Biden-Harris Administration celebrates Earth Day, the U.S. The grant competition is funded by President Biden’s Investing in America agenda through the Inflation Reduction Act, which created EPA’s $27 billion Greenhouse Gas Reduction Fund. For a conventional loan, the most popular type of mortgage, you'll need a minimum credit score of 620. The purchase price of the home doesn't typically have a direct impact on what credit score you'll need. However, if a higher price leads to you making a small down payment, you may need to have a better score to compensate for that. In addition to a front-end DTI of 36%, most conventional lenders have a back-end (total) DTI limit of 45%.

That’s a big deal, because mortgages backed by the Department of Veterans Affairs typically don’t require a down payment. The NerdWallet Home Affordability Calculator takes that major advantage into account when computing your personalized affordability factors. Loans backed by the FHA can also have more relaxed qualifying standards — something to consider if you have a lower credit score. If you want to explore an FHA loan further, use our FHA mortgage calculator for more details.

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And from applying for a loan to managing your mortgage, Chase MyHome has you covered. The process of spreading your interest and principal payments over time is called amortization. This typically happens at the end of your term unless you make extra payments.

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What can you afford to spend on a house? Try our SoCal-specific calculator.

Or, you may be able to pick up a nearly 1,700-square-foot, three-bedroom, three-bathroom home in Denver, Colorado, for the same amount. In this example, you’d score more than double the square footage in Columbia than in Denver for the same price. No matter where you are, though, housing affordability likely nags you. Real estate platform Zillow reported in February 2024 that the average U.S. household needed to earn roughly $106,000 to “comfortably” afford a typical home. That amount is $25,000 above the typical U.S. household income cited by Zillow—about $81,000.

USDA loans require no down payment, and there is no limit on the purchase price. However, these loans are geared toward buyers who fit the low- or moderate-income classification, and the home you buy must be within a USDA-approved rural area. If you choose a 15-year fixed-rate term, you’ll save money on interest, but won’t qualify for as much house. Our calculator is preset to a “conservative” 28% DTI ratio; most lenders set a maximum DTI limit between 41% and 45%. You can slide the bar up to an “aggressive” 50% DTI ratio if you’re willing to make room in your budget for a higher payment.

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For example, let’s say that you could technically afford to spend $4,000 each month on a mortgage payment. If you only have $500 remaining after covering your other expenses, you’re likely stretching yourself too thin. Remember that there are other major financial goals to consider, too, and you want to live within your means.

Furthermore, expect lenders to perform a hard credit check on your credit report, which means it can impact your credit score. Annual property tax is a tax that you pay to your county, typically in two installments each year. The amount of the property tax varies depending on where you live, and is usually calculated as a percentage of your property’s value.