How much you can afford for a mortgage depends on many factors including how much money you have to put down, what type of loan you can get, how much your closing costs are and consideration of other expenses you need to cover.


Here's a few quick ways to estimate...

  • How much can you borrow? Most lenders want your housing expenses (mortgage, plus taxes and insurance) to remain under 28% of your gross income. Calculate 28% of your gross monthly income to see what amount you have each month for this.

  • How much cash do you have for a down payment? With a conventional mortgage a buyer typically pays 20% of the purchase price up front. Most lenders will also let you put 10% down if you pay private mortgage insurance. Other types of loan programs may be available that allow for reduced down payment percentages. FHA loans can get down payments below 3%.

  • How much cash do you have for closing? You will need cash at closing (unless you have negotiated with the seller to pay your fees.) The cash you will need at closing is typically 2-3% of the total purchase price.


Money for Taxes and Insurance. It is also important to factor in how much taxes and insurance will cost for a given property. Typically your lender will add these amounts into your monthly payment.

Money for Additional Expenses. Keep in mind that you may need to reserve some money for repairs, remodeling, decorating, moving expenses, or life's emergency fund.